Trust Protectors and Trust Advisors

A "trust advisor" or "trust protector" is a person who has some official role in the administration of a trust, but is not the trustee.  In our office, we call them "advisors"; "protector" is a term that tends to be favored in Commonwealth countries.  An advisor/protector can have as much or as little control as the situation demands:

• He or she can be a pure advisor: the trustee is directed to consult with the advisor on certain matters, but is not bound by the advice given.
• The advisor can have veto power over particular actions, such as selling a business or making discretionary distributions to a beneficiary.
• The advisor can have the power to direct the trustee on certain matters.  A couple of common arrangements are to have an advisor directing the trustee in voting shares in a closely-held business, or in making insurance investments in a life insurance trust.  (Some banks and trust companies will require an advisor with authority over the selection of insurance policies as a condition of accepting a life insurance trust.)
• The advisor can have the power to remove the trustee, and/or name a successor trustee.

There can be multiple advisors, each with a particular area of responsibility.  There will also be language in the trust providing that the trustee will not be liable to the beneficiaries for any actions taken on the advice, or at the direction, of a trust advisor.

If you want to learn more about trust advisors and protectors, there is a very good short article on them at the Forbes magazine website.