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1520 6th Ave
San Diego, CA, 92103
United States

(619) 320.8780

San Diego law firm focusing on estate planning including preparation of trusts, wills, and powers of attorney, trust administration, probate, business formations including partnerships, limited liability companies, and corporations, business succession planning, bankruptcy, business litigation, employment law, and general civil litigation.

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Current happenings and anecdotal information regarding estate planning, wills, trusts, business formations, partnerships, Limited Liability Companies, Corporations, business succession planning, and bankruptcy.

Internal Trust Disputes & the Trust Protector: A Lesson from Spaceballs

Casey OConnell

Internal disputes amongst successor trustees and trust beneficiaries are common. Despite the intent expressed in a trust document, beneficiaries may argue about distributions, clash with the successor trustee, or carry preexisting spats with siblings and family members into a trust administration. Our firm regularly sees beneficiaries who are disappointed or disgruntled with the trustee's failure to communicate about trust administration or failure to properly distribute trust assets as called for in the document. This bickering between beneficiaries or between beneficiaries and trustee can create such strife that court intervention is needed to interpret the trust and direct or correct the behavior of the trustee. After all, your trust was created to help avoid the need for court interaction with your estate so how do you keep your trust out of court and prevent your trustee and beneficiaries from dueling like the clowns below?

Our firm implements "Trust Protector" provisions into your revocable living trust to prevent such internal squabbling between trustees and beneficiaries. What does a Trust Protector do, you ask? The simplest way to put it is that the Trust Protector is tantamount to a referee. In the absence of a rule enforcer, you have chaos. Traditionally, a Probate Court judge was the only individual with the ability to diffuse internal trust disputes, however, using these new provisions in your trust allows the Trust Protector to act as that rule enforcer. This saves your estate court costs, attorneys' fees, time, and also defeats the potential for a larger dispute or trust contest. Imagine a boxing match without a referee. The fighters would break the rules, throw low blows, and make a mockery of the sport much like the "Schwartz" fighters in the clip from Spaceballs. However, if your trust has a referee, the risk of such behavior is mitigated if not eliminated. 

So what authority does the Trust Protector have over the trust? The Trust Protector is vested with the authority to oversee a trustee's discretionary distributions to beneficiaries. Simply put, the Trust Protector makes sure such discretionary distributions are done prudently under the circumstances and prevents breaches of the trust's terms. The Trust Protector is authorized to request financial statements and bank statements of trust assets to prevent fraud and Trustee self-dealing (i.e. using trust assets to benefit the trustee personally). The Trust Protector also has the power to remove a successor trustee should he or she engage in malfeasance or should he or she fail to uphold the position of trustee under the law. Moreover, and importantly, the Trust Protector is authorized to mediate Trustee and Beneficiary disputes as opposed to bringing the dispute to court, or to resolve ambiguities in trust provisions. Instead of allowing your trustee and beneficiaries to blindly battle one another like the two stooges in the video, the Trust Protector can be consulted to interpret, correct, or direct the proper administration of the trust. 

These provisions may also include the power for the Trust Protector to amend the trust document in certain limited circumstances. For instance, the Trust Protector may be afforded the power to amend the trust if there is a change in the law or financial changes impacting the purpose of the trust. The Trust Protector may also amend the trust to correct typos in the trust document or other scrivener errors that would otherwise require court reformation through a formal petition.

The Trust Protector can be anyone you'd like to act in that role, however, most of our clients select our firm to act in this capacity. The reason being is that your estate planning attorney has been involved in the creation of your trust and is likely to understand and recall your intent with respect to the trust provisions and is also conscious of the Probate Code and the obligations of the trustee to the trust and its beneficiaries. 

To discuss the application and implementation of these provisions to your existing trust or to discuss your estate planning objectives and the advantages of the Trust Protector, contact our firm today.