You created a trust years ago to protect your family’s future. Maybe it was part of your estate plan to shelter assets for your children, or to provide for a loved one with special needs. At the time, everything seemed carefully planned and secure.
But time passes.
Tax laws change. Family situations evolve. A trustee you once trusted may no longer be the right person for the role. Or perhaps you’ve revisited the trust and realized certain provisions don’t work as intended.
What once seemed like a solid plan may now create complications or fail to accomplish your original goals.
The challenge is that trusts—especially irrevocable trusts—can be difficult to modify once they’re established. Court involvement is often required, which can be expensive, time-consuming, and public. As a result, many families simply live with trusts that no longer function properly.
Fortunately, there is a solution many people aren’t aware of: the trust protector.
What Is a Trust Protector?
Under North Carolina law, these individuals are sometimes called “power holders,” though the term trust protector is more widely used.
A trust protector acts as a troubleshooter for the trust, with authority to make certain administrative adjustments without serving as the trustee.
This role is distinct from the trustee’s responsibilities.
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Trustees manage the trust’s assets, make investment decisions, and distribute funds according to the trust terms.
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Trust protectors typically do not manage assets or oversee daily operations.
Instead, a trust protector has limited authority to address structural or administrative issues within the trust.
Another important distinction is that trust protectors often serve in a non-fiduciary capacity, meaning they are not bound by the same fiduciary duties as trustees. This allows them to address certain issues more efficiently and with fewer restrictions.
What Can a Trust Protector Do?
The authority of a trust protector depends on the powers granted within the trust document. These powers can be narrow and specific or broad and flexible, depending on the goals of the trust creator.
Common powers given to trust protectors include:
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Removing and replacing trustees when necessary
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Modifying administrative provisions to reflect changes in law
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Correcting drafting errors or unclear language in the trust
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Changing the trust’s legal jurisdiction (situs) to take advantage of better laws in another state
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Terminating or combining trusts when appropriate
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Adjusting beneficiary provisions in certain circumstances
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Mediating disputes between trustees and beneficiaries
The goal is to ensure the trust can adapt to changing circumstances while still honoring the original intent of the person who created it.
Why the Non-Fiduciary Role Matters
Trust protectors often operate in a non-fiduciary role, and that distinction can provide several important advantages.
Reduced Liability
Trustees carry significant fiduciary responsibilities and can be personally liable for decisions affecting the trust. Trust protectors, acting in a non-fiduciary capacity, typically face less exposure to liability, making it easier to find someone willing to serve in the role.
Potential Tax Benefits
Because trust protectors are not managing assets or making distribution decisions, their actions generally do not trigger the same tax consequences that might arise from trustee or beneficiary modifications. This is particularly important for irrevocable trusts intended to remain outside the grantor’s taxable estate.
Greater Flexibility
Trust protectors can often act more decisively and without the conflicts of interest trustees may face. Their role focuses on maintaining the structure and effectiveness of the trust rather than overseeing its daily administration.
When Should You Consider Adding a Trust Protector?
Trust protector provisions are especially useful when creating long-term or irrevocable trusts that may exist for decades.
Including a trust protector functions as a built-in safeguard, allowing the trust to adapt to circumstances you cannot predict today.
If you already have an existing trust, you may still be able to add a trust protector depending on the terms of the trust and applicable North Carolina law. In some cases, this can be accomplished through:
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Nonjudicial settlement agreements
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Court approval for trust modification
Your trust may benefit from a trust protector if:
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The trust is designed to last many years or decades
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Tax laws or government benefit rules have changed significantly since the trust was created
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Your family circumstances have changed over time
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The trust operates across multiple states
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You are concerned about who may serve as trustee in the future
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The trust contains complex provisions that may require adjustments
Getting Your Trust Back on Track
Trusts are powerful estate planning tools, but they are not something you create once and ignore forever. Even a well-designed trust may need adjustments over time as laws and family circumstances evolve.
Adding a trust protector can provide the flexibility needed to keep your trust functioning as intended, even many years after it was created.
At Plyer, Long & Corigliano, we help North Carolina families design trusts that stand the test of time. This includes carefully crafted trust protector provisions that allow your plan to adapt as needed.
We also assist families whose existing trusts may need adjustments.
If you’re concerned that a trust may no longer be working as intended, it may be time for a trust checkup.
Schedule a consultation today to review your trust and explore whether adding a trust protector could help safeguard your family’s legacy.
