Protector (trust)


In trust law, a protector is a person appointed under the trust instrument to direct or restrain the trustees in relation to their administration of the trust.
Historically, the concept of a protector developed in offshore jurisdictions where settlors were concerned about appointing a trust company in a small, distant country as sole trustee of an offshore trust which is to hold a great deal of the settlor's wealth. However, protectors now form a part of mainstream tax planning in most jurisdictions which recognise trusts.
There are a number of reasons that a settlor may wish to appoint a protector in relation to a trust:
The powers vested in the protector vary both according to the proper law of the trust and the terms of the trust instrument. They include power to:
  1. remove and appoint trustees;
  2. approve a change of proper law;
  3. approve the addition or removal of beneficiaries;
  4. approve proposed trust distributions;
  5. approve the appointment of an agent or adviser either generally or in relation to specific matters;
  6. approve investment recommendations;
  7. appoint replacement protectors; and
  8. terminate the trust or approve the termination of the trust.
Conceptually many commentators have difficulty with the idea of a protector, as this undermines the role which in law has historically been fulfilled by the trustees. As protectors are a relatively recent innovation in trust law, case law is scant. Is it not even clear if as a matter a law a protector would owe fiduciary duties to the beneficiaries.
It is sometimes suggested that where the protector is too close to the beneficial interest in the trust this may destroy the essential nature of the trust. If the protector has power to grant beneficial interests in the trust fund to the settlor, this may have disastrous tax consequences in some jurisdictions.

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