The Super-Fiduciary: Trust Protectors & Decanting
The Super-Fiduciary: Trust Protectors & Decanting
Why every trust needs a “kill switch”: How to fire a bad trustee and rewrite “irrevocable” rules without going to court.
Executive Summary
- The Problem: “Irrevocable” trusts are designed to be permanent. But what if tax laws change, or the corporate trustee becomes incompetent and raises fees? Beneficiaries are often powerless to act.
- The Solution (Trust Protector): A designated individual (not the trustee) who holds special powers, such as the ability to fire and replace the trustee, veto distributions, or amend administrative provisions.
- Decanting: The legal process of “pouring” assets from an old, outdated trust into a new trust with better terms. This allows you to modernize a 50-year-old trust without court approval.
Directed Trusts
Modern trusts split power. Instead of the Trustee doing everything, a “Directed Trust” separates duties: An Investment Advisor manages assets, a Distribution Committee decides payouts, and the Administrative Trustee merely follows orders.
Mechanic: The Power Balance
Fire Trustee
The Kill Switch
Veto Power
Check & Balance
Decanting
Rewrite Rules
Change Situs
Move Jurisdiction
Simulation: The “Hostage” Scenario (Bad Trustee)
Outcome when Trustee Underperforms
| Role | Primary Responsibility | Power Level |
|---|---|---|
| Administrative Trustee | Custody, Tax Filings, Record Keeping | Low (Directed) |
| Investment Advisor | Buy/Sell Decisions, Asset Allocation | High (Control Capital) |
| Trust Protector | Oversight, Firing Trustee, Decanting | Ultimate (Super-User) |
“A Trust without a Protector is like a car without brakes. It runs fine until you hit a curve, and then you have no way to stop the crash.”
Essential Resources
INTERNAL
BMT Playbooks