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When is a Trust Protector Replacement Invalid?

Posted on: December 15th, 2014
trust protector replacementTrust Protectors are relatively new provisions in domestic trusts. Providing for a Trust Protector offers flexibility and control over trusts that might otherwise require lengthy court proceedings. Our trust attorneys reviewed how trustees can be removed and replaced in an earlier post—a procedure that might be expedited by the powers of a Trust Protector—and now a recent court case in South Carolina has brought attention to another matter: Replacing a Trust Protector.

Schwartz v. Wellin involves attorney Lester Schwartz who served as Trust Protector over the Wellin family’s irrevocable trust. Schwartz filed a complaint against the trust’s beneficiaries after the beneficiaries liquidated trust assets. The trust terms provided that the beneficiaries had the power to remove an appointed Trust Protector, and the beneficiaries exercised this authority. 

After Schwartz was removed, he appointed a replacement Trust Protector to continue the complaint process. The beneficiaries cited the new Trust Protector appointment was invalid since Schwartz no longer had any powers as Trust Protector. However, the court decided that Schwartz’s removal was invalid since trust provisions require that a Trust Protector always be in place. 

Had the beneficiaries removed Schwartz and concurrently replaced him with an alternative Trust Protector, his removal would have been valid. 

Before amending or taking action with regard to trust provisions dealing with Trustees or Trust Protectors, discuss with a qualified trust attorney. Parties named in a trust have specific responsibilities. While these parties must fulfill their duties, the trust’s terms need to be followed. As showcased above, failing to comply with trust provisions can invalidate certain actions and cause legal conflict. 

Trust Protectors provide invaluable flexibility and protection for irrevocable trusts. We recommend that Trust Protector provisions be placed in virtually every trust that is or will become irrevocable. In some cases, Trust Protectors can even be added to existing irrevocable trusts.
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