When you’re thinking about creating your living trust, one of the most important decisions you will make is selecting a trustee. However, in addition to selecting a trustee, Arizona law provides an option for selecting a trust protector as well. While they may sound similar, there are some key differences to understand when you are creating your trust.
What is a Trustee?
A trustee is the person you select to manage the administration of your trust and its assets after your death. Practically speaking, this includes responsibilities like managing investments and other trust assets and distributing these assets to beneficiaries. Trustees are considered fiduciaries, meaning they have a legal duty to administer your assets in accordance with your wishes in the best interests of the beneficiaries of the trust. This should give some peace of mind because fiduciaries are held to higher legal standards than those who are not acting in a fiduciary capacity. On the other hand, this can sometimes tie the trustee’s hands in terms of what they can and cannot do in ways that may be undesirable for your circumstances.
What is a Trust Protector?
A trust protector is essentially a person you appoint to oversee the trust, including the actions of the trustee in administering your trust. While a trustee is required in order to manage the trust, having a trust protector is an optional addition. A trust protector can be a good option if your trust may last for an extended period rather than being distributed after your death. This is because the trust protector typically has the power to modify the trust, resolve disputes that arise, and they can even appoint a new trustee if the circumstances warrant it. It’s ultimately up to you how much power you give your trust protector, and whether you even have one at all.
How Do They Differ?
The biggest difference between trustees and trust protectors goes back to fiduciary duties. While a trustee has a fiduciary duty to the beneficiaries, trust protectors are not fiduciaries under Arizona law. This actually gives the trust protector a bit more flexibility than a trustee would have. Because trust protectors aren’t fiduciaries, they don’t always have to act in the best interests of the beneficiaries. The trust protector can take actions to protect your wishes, even if that decision isn’t what’s best for the beneficiaries.
Selecting a person you trust to serve as the trustee of your living trust is crucial. Having a trust protector to serve alongside your trustee is an additional, optional safety net. For most people, just having a trustee is completely sufficient. However, if you are curious whether it would be wise to appoint a trust protector as well, we can discuss your options with you by scheduling a quick consultation with us today.