August 28, 2009 - Phil Hodgen

A rare reported U.S. case on trust protectors

Trust protectors are a rare breed in U.S. trusts. Our firm knows about using protectors because we do so much work with offshore (i.e., non-U.S.) trusts, where use of a protector is common. Case law from U.S. courts defining a protector’s rights and responsibilities are even rarer.

The Missouri Court of Appeals has a recent opinion involving a protector (warning: PDF). Cut to the chase — the Protector was a fiduciary, had an obligation to monitor the trustee’s (bad) behavior, and replace the trustee if necessary.

Memo to all personnel

Here are life’s lessons (re-learned) from this case:

  • If you are a lawyer drafting a trust, do not blithely add a trust protector provision until you know what you’re doing.
  • If you are a person appointed to be a protector, you are probably taking on serious responsibility and risk so be prepared to do real work and expect to be paid real money.

Here’s my addendum to the life’s lessons learned:

  • If you utter the words “Oh, it’s all boilerplate, how hard can it be?” within earshot of me, you’re out the door on roller skates. 🙂
Foreign Business Activities in the USA Nonresidents with US Activities Tax and Trusts