A Trust Protector is a relatively modern concept in trust law that provides an additional layer of oversight and control over the trust. While the specific powers and duties of a Trust Protector can vary based on the terms of the trust agreement, generally, the role is designed to ensure that the trust is administered in accordance with its terms and for the benefit of the beneficiaries.
In the Delaware Statutory Trust industry, which often deals with investment vehicles for real estate and other assets, a Trust Protector might be granted certain powers, including:
- Amending the Trust: The Trust Protector may have the authority to amend the trust document to address changes in law, correct errors, or modify the terms to better achieve the trust’s purposes.
- Changing Trustees: They may have the power to remove and replace trustees without going to court, if, for example, a trustee is not performing their duties effectively.
- Approving or Directing Trust Investments: While the trustee typically has the responsibility for managing the trust’s assets, the Trust Protector might have the authority to approve significant investment decisions or provide direction.
- Veto Powers: The Trust Protector might have the ability to veto certain decisions of the trustee that they believe are not in the best interests of the beneficiaries.
- Mediating Disputes: They can act as a mediator in disputes between beneficiaries and trustees, or between the beneficiaries themselves.
The role of a Trust Protector is particularly beneficial in the context of a Delaware Statutory Trust because DSTs are often used for securitization in investment strategies. A Trust Protector can provide investors with a sense of security knowing that there is an independent party that can step in if the trust is not being managed properly.
However, it’s important to note that the specific role and powers of a Trust Protector will depend on the governing document of the DST. The appointment of a Trust Protector is not mandatory, but it is an option that provides flexibility and can help in aligning the interests of the trustees with those of the beneficiaries.