SUGGESTED TRUST PROTECTOR LANGUAGE Warning Legal Advice should be sought before any language is inserted into a Trust

Transcription

1 SUGGESTED TRUST PROTECTOR LANGUAGE Warning Legal Advice should be sought before any language is inserted into a Trust 1. Trust Protector. The Trust Protector is to assist, if needed, in protecting the interests of the beneficiary(ies) so as to achieve the objectives of the settlor(s) of the Trust. Each power and authority granted to a Trust Protector in this instrument, unless the capacity is otherwise specifically stated, is conferred in a non-fiduciary capacity. [Add the following if needed for tax reasons:] Any Trust Protector must be a corporate fiduciary or an individual or firm who is not related or subordinate to the settlor, while the settlor is still living, or to any beneficiary within the meaning of Internal Revenue Code Section 672(c), and must not be an adverse party within the meaning of Internal Revenue Code Section 672(b). The settlor, any trust beneficiary, or any person who has contributed to the trust may not serve as a Trust Protector at any time under this instrument. 2. Designation of Trust Protector. The Trust Protector to act under the terms of this Trust is: Trust Protector Partners, with offices at 301 North Lake Avenue, Suite 1002, Pasadena, CA , (Trust Protector). [For a Special Needs Trust use these paragraphs 1 and 2] 1. Trust To Which the Trust Protector Language Applies. The Trust Protector provisions shall apply to the special needs trust described in Article, not to the Revocable Trust. The Trust Protector is to assist, if needed, in protecting the interests of the special needs trust lifetime beneficiary and in achieving the objectives and intent of the special needs trust agreement. References to the trust agreement in Article shall apply to the special needs trust. Each power and authority granted to a Trust Protector in this instrument, unless the capacity is otherwise specifically stated, is conferred in a non-fiduciary capacity. 2. Designation of Trust Protector. The Trust Protector to act under the terms of this Trust is: Trust Protector Partners, with offices at 301 North Lake Avenue, Suite 1002, Pasadena, CA , (Trust Protector). [Continue with... ] 3. Powers Granted to Trust Protector. The Trust Protector shall have the following powers: a. Removal and Replacement of Trustee. The Trust Protector shall have the power, at any time and for any reason, with or without cause, to remove any trustee acting under this instrument. Before removing the trustee, the Trust Protector shall make a reasonable attempt to resolve the issues with the trustee and similarly, the trustee shall make a reasonable attempt to resolve the issues with the Trust Protector, provided removal is not for malfeasance The successor trustees designated by the settlors shall serve as trustee in the order named, and if they are unable or unwilling to serve, the trustee shall be named as provided in in this Trust. The Trust Protector may appoint a trustee if the office of the trustee is vacant. The Trust Protector may not appoint itself as a Trustee, and the Trust Protector may not simultaneously serve as both Trust Protector and Trustee. b. Effective Date of Removal. Removal shall be effective 30 1

2 days from the date written notice of removal is given by personal delivery, certified mail, or by recognized overnight delivery service, to the trustee at the last known address of the trustee and to the designated successor. Provided however, removal shall be effective immediately upon sending written notice if the reason for removal is malfeasance or failure to cooperate with reasonable requests of the Trust Protector. c. Content of Notice. The notice of removal shall state the reason for removal, whether with or without cause. Reasons for removal can include, but are not limited to, failure to treat the beneficiary with kindness or respect, failure to communicate regularly with the beneficiary, failure to respond to the beneficiary s communications within a reasonable time or that the trustee s attitude toward the beneficiary is counter-productive and contrary to the settlor s intent. [Use this alternative paragraph 3 if Trust Advisory Committee is established under terms of the trust] 3. Powers Granted to Trust Protector. The Trust Protector shall have the following powers: a. Removal of Trustee. The TAC (Trust Advisory Committee), acting unanimously, or the Trust Protector may remove any Trustee for any reason, cause, or ground. The TAC may not remove any trustee appointed by the Trust Protector. b. Effective Date of Removal. Removal shall be effective 30 days from the date written notice of removal is given by personal delivery, certified mail, or by recognized overnight delivery service, to the trustee at the last known address of the trustee and to the designated successor. Provided however, removal shall be effective immediately upon sending written notice if the reason for removal is malfeasance or failure to cooperate with reasonable requests of the Trust Protector. The notice of removal shall state the reason for removal, whether with or without cause. Reasons for removal can include, but are not limited to, failure to treat the beneficiary with kindness or respect, failure to communicate regularly with the beneficiary, failure to respond to the beneficiary s communications within a reasonable time or that the trustee s attitude toward the beneficiary is counterproductive and contrary to the settlor s intent. c. Replacement of Trustee. Whenever a Trustee is removed, dies, resigns, becomes legally incapacitated, or is otherwise unable or unwilling to serve, that Trustee shall be replaced as follows: i. By TAC. The TAC may designate a successor Trustee by majority vote. The successor Trustee shall be a corporate fiduciary or individual familiar with the administration of trusts. The Trustee so appointed may not be related or subordinate to any of the TAC members within the meaning of Section 672(c) of the Internal Revenue Code. ii. By Trust Protector. If there is no TAC serving or the TAC fails to designate a successor trustee within 10 business days of knowledge of the vacancy in the office of trustee, then the Trust Protector may designate a successor Trustee. The successor Trustee shall be a corporate fiduciary or individual familiar with the administration of trusts. The Trustee so appointed may not be related or subordinate to the Trust Protector within the meaning of Section 672(c) of the Internal Revenue Code. 2

3 [Continue with... ] d. Power to Amend Trust Agreement. The Trust Protector may: i. Add or modify terms of the trust to protect the purpose of this trust; ii. Alter the administrative and investment powers of the Trustee to comply with any changes in the law; iii. Add or modify terms of the trust to reflect tax or other legal changes that affect trust administration; and iv. Clarify or correct ambiguities, including scrivener errors, that might otherwise require court construction or reformation. Notwithstanding the foregoing, the Trust Protector shall not amend this agreement to limit or alter the Beneficiary s right to trust assets. An amendment to this trust shall be made in a written instrument signed by the Trust Protector. The Trust Protector shall mail, by first class mail, a copy of the amendment to the beneficiary or the beneficiary s legal representative, the members of the Trust Advisory Committee if serving and the currently serving trustee. [For a Special Needs Trust use this alternative paragraph d] d. Power to Amend Trust Agreement. The Trust Protector may amend any provision of this trust to: i. Add or modify terms of the trust so that the trust will protect the financial resources governed by this agreement and comply with the intent of this trust which is, the trust assets shall not be considered income or resources for all needs-based and entitlement benefits from any agency, such as Regional Center benefits, Social Security Disability Insurance (SSDI), Medicare, Medicaid (Medi-Cal in California), Supplemental Security Income (SSI), Section 8, and any other special purpose benefits for which the beneficiary is eligible or would be eligible if the terms of the trust were modified or supplemented; ii. Alter the administrative and investment powers of the trustee to comply with any changes in the law; iii. Add or modify terms of the trust to reflect tax or other legal changes that affect trust administration; and iv. Clarify or correct ambiguities, including scrivener errors, that might otherwise require court construction or reformation. Notwithstanding the foregoing, the Trust Protector shall not amend this trust agreement in any manner that would limit or alter the rights of the beneficiary in any trust assets held by the trust before the amendment, unless the purpose of the amendment is to modify an existing provision in the trust that defeats the trust s intent of preserving public benefits. 3

4 [Continue with... ] An amendment to this trust shall be made in a written instrument signed by the Trust Protector. The Trust Protector shall mail, by first class mail, a copy of the amendment to the beneficiary or the beneficiary s legal representative, the members of the Trust Advisory Committee if serving and the currently serving trustee. e. No Modification of Trust Protector s Powers. Notwithstanding any other provision of this instrument, the Trust Protector may not amend or modify any power or provision of the trust so as to expand the Trust Protector s amending powers or the Trust Protector s other existing powers, authorities, or discretions. This provision shall not prevent the Trust Protector from making amendments to correct scrivener's errors as to the Trust Protector's powers, authorities, and discretions, or to amend the trust in any manner required for the sole purpose of ensuring that the powers, authorities, and discretions of the Trust Protector remain legally binding and valid under state and federal law. f. Power to Change the Governing Law and Situs of Administration. The Trust Protector may change the governing law of the trust, or change the situs of administration of the trust. g. Power to Compel, Approve, or Reject Trustee Accountings. The Trust Protector may demand from time to time a written accounting from the Trustee, but not more often than quarter-annually (four times per calendar year). If the Trustee fails to account to the Trust Protector within 60 days of a written demand, the Trust Protector may institute appropriate legal actions on behalf of the beneficiaries to compel a full accounting and for other appropriate relief that is granted to the Trust Protector, by law or under these provisions. The Trust Protector must either approve or reject any accountings provided by any Trustee within 60 days after the Trustee provides the accounting. Failure to act by the Trust Protector within the 60-day period will be treated as approval of the accounting by the Trust Protector. If the Trust Protector approves an accounting, the approval will be binding on all other parties to the fullest extent allowable under the law. If the Trust Protector rejects a Trustee's accounting, the Trust Protector must provide the Trustee with an explanation that adequately enables the Trustee to revise its accounting. The Trustee will then promptly present the revised accounting to the Trust Protector for approval or further revizion, as necessary. h. Executing Documents Denoting Authority. The Trust Protector may execute and deliver, and may direct any Trustee to execute and deliver, any documents necessary to carry out any power granted to the Trust Protector or the Trustee. All parties dealing with the Trust Protector and the Trustee may rely on statements and documents made by the Trust Protector and by any Trustee. No party is required to inquire into any statement or document s validity. If any conflict exists between assertions of authority made by the Trust Protector and the Trustee, assertions made by the Trust Protector will control, and any assertion made by the Trustee will be disregarded to the extent of the conflict. i. Trust Protector Considered to Have Consented. If any provision of this Article requires the consent or approval of the Trust Protector before a Trustee can act and the Trust Protector does not affirmatively deny consent to the proposed action in writing within 10 business days after receiving written notice that approval or consent is sought for the particular act, the Trust Protector will be considered to have given consent or approval for the Trustee's 4

5 proposed action unless a greater time period is specifically allowed for the Trust Protector to act. j. Consultation. The Trustee is authorized to use the Trust Protector as a resource, by consulting with the Trust Protector as to any matter relating to the investment of assets, discretionary distributions and use of income and/or principal, tax matters, dealings with the beneficiary(ies), and any other matter relating to the administration of the Trust in keeping with the objectives and purpose of this Trust. The Trustee will not be liable for reasonable reliance on the written instructions of the Trust Protector. k. Dispute Resolution Powers. i. Resolution of Disputes. With the agreement of all beneficiaries involved (including those beneficiaries who have or claim to have a present or future interest in trust property), the Trust Protector may resolve any matter in dispute or conflict among such beneficiaries. With the agreement of the trustee and all beneficiaries involved, the Trust Protector may resolve any dispute, claim or conflict among such beneficiary or beneficiaries and the trustee. The Trust Protector may unilaterally resolve any conflict between co-trustees. ii. Trust Litigation, Mediation and Arbitration. No one may file a claim or petition in a court of law without first submitting the claim to the Trust Protector for resolution, together with detailed supporting information and a detailed supporting memorandum of law. The Trust Protector may employ, and may act upon the advice of legal counsel in resolving any issue of fact and/or law. After review of the information and the memorandum, the Trust Protector may submit the claim or dispute for mediation, binding arbitration, or may give any claimant the authority to mediate the dispute, file a claim or petition in a court of law. Failure of any party to first submit any dispute for resolution by the Trust Protector in accordance with this paragraph shall result in such party s forfeiture of a right to claim attorneys fees and or expenses in connection with any arbitration or other legal proceeding. iii. Interpretation of Trust Provisions. Whenever a dispute, conflict, or claim involves an interpretation or construction of this Trust, the Trust Protector may authorize the trustee, any beneficiary, or other interested person to file a claim or petition in a court of law for the interpretation and construction of this Trust. 4. Resignation of Trust Protector. A Trust Protector may resign by giving notice to the Beneficiary(ies), to the Beneficiary s(ies ) legal representative, and to the Trustee then serving. Such resignation shall take effect on the date set forth in the notice, which shall not be earlier than 30 days after the notice of resignation is delivered, unless the Trustee or Trust Advisory Committee, if serving, agrees to an earlier effective date. 5. Authority of Trust Protector to Designate a Successor Trust Protector. Any Trust Protector (including successors) shall have the right to designate a successor Trust Protector. Such designation shall be in writing and take effect on the death, resignation, or incapacity of the designating Trust Protector. Successor Trust Protectors must be drawn from this agreement s list of successor Trust Protectors, if any. The Trust Protector may designate a successor Trust Protector not identified in this agreement who shall serve only if and when all named successor Trust Protectors, if any, fail to qualify or cease to act. 5

6 6. Trust Protector Vacancy. If the office of Trust Protector is vacant and there is no effectively named successor Trust Protector, the [Trustee/Trust Advisory Committee] may appoint a successor Trust Protector for the Trust. If the [Trustee/Trust Advisory Committee] is unable or unwilling to appoint a successor Trust Protector, the then acting President of the Professional Fiduciaries Association of California (PFAC) shall designate a Trust Protector, who shall be a trust and estates attorney with at least 10 years of experience. 7. Rights of Successor Trust Protectors. Any successor Trust Protector shall have all of the authority of the Trust Protector by original appointment and will not be responsible for his or her predecessor s acts or failures to act. 8. Trust Protector Standard of Conduct. The Trust Protector has no general duty to monitor or remain informed about the administration of the trust. Therefore, the Trust Protector is not required to exercise any power or discretion granted under this trust agreement. Any exercise or failure to exercise any of the powers and discretions granted to the Trust Protector shall be in the sole and absolute discretion of the Trust Protector and shall be binding and conclusive on all persons. Specifically, the Trust Protector has no duty to investigate the Trustee s actions or inactions, to audit the trust s books, to review the trust s investments, or to evaluate the trust portfolio s performance, unless a trust beneficiary or some other interested party: (a) files a written complaint with the Trust Protector alleging a breach of trust and detailing the matters the Trust Protector should investigate, audit, review, or evaluate; (b) requests an action that the settlor has authorized the Trust Protector to perform; or (c) such a duty is imposed because of the level of service that Trust Protector Partners has been engaged to provide as evidenced by the written agreement that has been accepted by Trust Protector Partners. If the Trust Protector possesses the power to direct, consent to, or veto the actions of a trustee described in the written complaint, the settlor directs that the Trust Protector defer to the Trustee s judgment except in those instances in which the Trust Protector can find no rational basis for the Trustee s actions, omissions, or forbearances. The Trust Protector will only suffer liability for an omission or forbearance if by clear and convincing it is established that: The trust suffered monetary loss and the Trust Protector made no reasonable inquiry when alerted that the Trustee might have breached the Trustee s fiduciary duties; or Even if the Trust Protector made a reasonable inquiry, no other reasonable person would have failed to take action against the Trustee under those circumstances. 9. Not a General Power of Appointment. It is the settlors intention that the Trust Protector s authority not be a general power of appointment under Internal Revenue Code 2041 and/or Accordingly, the Trust Protector s powers cannot be exercised in favor of the Trust Protector, the estate of the Trust Protector, or any creditor of the Trust Protector. Nor may any power be exercised to discharge an obligation of the Trust Protector to support another person. 10. Release of Powers. The Trust Protector, acting on his, her or its own behalf and on behalf of all successor Trust Protectors, may at any time, by a written instrument delivered to the trustee, irrevocably release, renounce, suspend, or reduce any or all powers and discretions conferred on the Trust Protector by this agreement. 11. Compensation. The Trust Protector shall be entitled to reasonable compensation for services rendered in this capacity. The Trust Protector shall be entitled to reimbursement for such services and all expenses incurred, as they are incurred, including, but not limited to, travel expenses and 6

7 expenses of lawyers that may be employed by the Trust Protector. Payment of compensation shall be from the funds of this Trust. 12. Bond. The Trust Protector will serve without posting bond or other security. 13. Right to Accountings and Examine Records. The Trustee s books and records concerning the administration of this trust, (including but not limited to all trust financial records, Trustee records, property inventories, and accountings), shall be open and available for inspection by the Trust Protector at all reasonable times. The Trust Protector shall also receive a copy of all trust accountings if the Trust Protector has been engaged to provide a level of service that would require the Trust Protector to receive such accountings and records. The Trustee shall reply promptly to all inquiries and requests for information from the Trust Protector. [ First of alternative paragraph Trust Protector Removal only by designated person] 14. Trust Protector Removal. I appoint the following person to remove and replace any Trust Protector serving under this trust instrument with or without cause: name address phone If the person named above is unable or unwilling to act, then s/he may select an individual to replace her or him. If person appointed above is not able or willing to name a replacement, then any beneficiary may petition a court of competent jurisdiction to designate, remove, or replace any then-serving Trust Protector. The court may only remove a Trust Protector for cause as determined by the court. The court removing a Trust Protector may appoint successor Trust Protectors to replace the removed Trust Protector immediately. The court acting to remove and replace a Trust Protector will acquire jurisdiction or authority over the trust only to the extent necessary for the removal and replacement of the Trust Protector. [ OR... Alternative paragraph 14 where no person designated to remove the Trust Protector] 14. No Removal by Trustee. No Trustee may remove a Trust Protector. [Continue with... ] 15. Indemnification of Trust Protector. In recognition that some persons or institutions may be reluctant to serve as Trust Protector without indemnification by the Trust for potential liability, the Trustee is directed to expend the trust assets to defend any claim brought against any Trust Protector as such cost of defense, including attorney s fees and expenses, are incurred, unless the Trust Protector is shown by clear and convincing evidence to have acted in bad faith, even if the cost of the Trust Protector s defense would exhaust the trust s value. If any claim brought against a Trust Protector is successful and the Trust Protector is shown to have acted in bad faith, the Trustee may seek reimbursement from that Trust Protector using any legal or equitable means available to the Trustee for the value of any Trust assets used to defend the Trust Protector. This Section applies to any currently serving Trust Protector and for claims brought against any former Trust Protector in connection with his or her acts, omissions, or forbearances in regard to the trust while serving as Trust Protector Trust Protector Partners - www. TrustProtectorPartners.com 7