There have been some interesting developments in the role of Trust Protectors and in particular, how the Courts view them.
Trust Protectors used to be a rarity, but with more countries operating under civil law enabling Trust legislation (Hungary being a recent case in point) this role has spread in popularity.
What is a Trust Protector?
Settlors unfamiliar with the concept of discretionary trusts are generally uncomfortable with the idea of handing over their assets to trustees in a jurisdiction they may never have visited or know little about. The role of a Protector, normally a family trusted advisor, to peek over the shoulder of the Trustee and perhaps exert certain powers, is very attractive.
A recent case in Jersey: the Royal Court sends a message
In the recent Jersey case of In the matter of A Trust it was clear the Protector was a little too overzealous and saw himself as a dogmatic guardian of the Settlors wishes.
The case hinged around two discretionary trusts with the same protector. After the death of the settlor the relationship between the beneficiaries and the protector appeared to have broken down irretrievably and the “overwhelming majority” of the beneficiaries wished to see him removed from office.
It appears the Protector misunderstood his role, insisting the Trustees rigidly adhere to the settlor’s wishes (as he interpreted them) rather than giving consideration to what may be in the best interests of the beneficiaries.
The Royal Court took a dim view and suspended the Protector’s powers and removed him from office. Further the Court commented that a Protectors role is “no higher” than to see the Trustees have “due regard” to the Trustees wishes. His misunderstanding had “potentially jeopardised the trusts” by his own “over zealous involvement”.
Understanding the role of a Protector
It is important therefore, that Settlors, Protectors and (to some extent) beneficiaries understand the role a Protector plays. As much as Trustees owe their duties to the beneficiaries, a Protector cannot consider himself a pseudo settlor, and must consider what is in the best interest of the beneficiaries even if this conflicts with the settlor’s wishes.
At Boston our experienced trust team have worked with Protectors over many years and are able to give guidance in this area to all parties which can avoid costly misunderstandings such as the case above.
For further information please contact Sarah Ingrassia by email firstname.lastname@example.org or phone 01624 692930.