Trust Protectors: Who are They & How to Appoint One in Singapore
To ensure the proper administration of a trust, many trusts provide for the trustees to be supervised by a trust protector.
This article provides an overview of:
- What is a trust protector?
- Who can be a trust protector?
- How can the trust protector be appointed?
- Is it possible for a trust protector to be removed?
A trust is a legal device where one person (the settlor) gives property to another person (the trustee) to hold and administer for the benefit of a third person (the beneficiary).
To prevent the trustee from abusing his powers, a trust protector is a third-party who has been given the powers to supervise the trustee’s actions on specified matters. Such powers of the trust protector will depend on the terms of the trust, but may usually include:
- Removal or appointment of trustees
- Removal or addition of beneficiaries
- Modification of the terms of trust
- Acting as a tiebreaker if the trustees are at an impasse
- Veto trustee decisions
The primary role of the trust protector is to ensure that the trustee exercises his powers in accordance with the terms of the trust. While protectors are not necessary for every trust structure, they are strongly recommended in cases where there is a risk that the trustee might (intentionally or otherwise) deviate from the terms of the trust.
For instance, trust protectors are commonly used in long-term, cross-generational family trusts. This is because the future beneficiaries and trustees are likely to be increasingly removed from the settlor’s original intentions, across generations.
Who Can be a Trust Protector?
Generally, anyone who has achieved the age of legal majority (21 years old) and is of sound mind may be a trust protector. Given the nature of the role, a settlor should also appoint someone he trusts and who is likely to have the experience or ability to properly supervise the trustee.
However, for higher-value or longer-term trusts, it is strongly recommended to appoint an independent third-party expert (such as a law or accounting firm) as the trust protector, rather than a family member or acquaintance, to ensure proper and continuous (for longer-term trusts) supervision of the trust.
How Can the Trust Protector be Appointed?
A trust protector is usually appointed through the original trust deed (or where the trust is created by will, in the will).
The deed should include a clause specifically providing for the appointment of a trust protector, as well as describing the nature of the role. At the very least, such a clause should include:
- The procedure for appointment or removal of trust protectors
- A list of powers to be held by the trust protector
- A procedure for the trust protector to appoint his successors.
The proper drafting of a trust protector clause is essential to the proper functioning of the trust structure.
The powers and duties of the trust protector must be properly designed for the specific case – excessive empowering of the trust protector may itself result in a risk of abuse of powers, while providing the trust protector with too few powers may reduce his ability to properly supervise the trustee.
Therefore, it is strongly recommended that settlors consult an experienced trusts lawyer to assist in the setting up of an optimal trust structure.
Is It Possible for a Trust Protector to be Removed?
Since a trust protector is generally a trusted person appointed to supervise the trustee’s activities, it is usually envisioned that he will continue in that role until he voluntarily retires.
However, there may be cases where it is necessary to forcibly remove the trust protector. This could be where the trust protector has been abusing his powers, or colluding with the trustee to misappropriate trust property.
As a matter of general trust law, the settlor usually becomes irrelevant once the trust is validly constituted. (In other words, he no longer has any rights over the trust property unless the trust deed specifically states otherwise.) As a result, it is usually the trust beneficiary who may want to remove the trust protector.
If the trust deed already expressly provides for a mechanism for the removal or reappointment of trust protectors, this is relatively straightforward and the beneficiary simply needs to follow that mechanism.
Problems arise in cases where the trust deed does not already provide for such a mechanism. Unfortunately, Singapore law is not very clear on the particular situations where a trust protector can be removed if the trust deed lacks an express removal mechanism.
Some major offshore jurisdictions like Jersey have permitted removal of trust protectors in cases of breakdown in relations between protector and beneficiary. However, it remains highly uncertain if a similar approach will be adopted in Singapore.
Hence, it is strongly recommended for a settlor to consult an experienced wills and trusts lawyer when drafting the trust deed in order to prevent such problems from arising later.
A trust is a flexible tool which can be used in many areas including estate planning, wealth management and intergenerational wealth transfer, with trust protectors being an excellent way to ensure proper administration of the trust.
In order to prevent difficulties from arising with your intended beneficiaries, it is strongly recommended to consult an experienced trusts lawyer at an early stage in order to design and execute an optimal trust structure for your legal needs.
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