International Law

The Trust Protector-Why It Is Used To Protect Offshore Assets

By Rick Rein

The trust protector is a person who plays several roles. It may bepolicing the trusteeship or enforcing the trusts as if he were the sole beneficiary. A protector can be given the responsibility to supervise and approve trustee actions. Yet, the protector is not the trustee and cannot carry out the functions of a trustee. Consequently, the protector is not accountable to the beneficiaries. A protector instead looks after the interests of the trust settlor in creating the trust.

The protector most often intervenes between the trustee and the the beneficiary, acting as a mediatoror. The protector polices the trustee, overseeing the administration of the trust with the focus on preserving the settlor's intentions. It is said that a protector is really about the retention of settlor influence if not control. Specific powers generally given a protector are:

• monitoring trustees fees
• periodic reviews of the administration of the trust
• power to nominate auditors
• veto power over discretionary payments by trustees
• veto power over sales of shareholdings or trust property
• remove and appoint trustees

It is the last power that has the raised awareness of protectors. When faced with creditor actions, the protector can change trustees to protect the trust assets. In that way, the settlor's intentions are preserved. The trust is removed from the reach of creditors and oftentimes moved from the jurisdiction to make detection more difficult. To reach an offshore trust, a creditor has to know the protective devices employed so that a recovery strategy can be designed to overcome the barriers presented by a protector.

Full post as published by International Asset Recovery Law Blog on June 02, 2009 (boomark / email).