Monday, July 7, 2014
Richard C. Ausness recently published an article entitled, When is a Trust Protector a Fiduciary?, 27 Quinnipiac Prob. L.J. 277-316 (2014). Provided below is an excerpt from the article:
The use of trust protectors has become increasingly popular in the past twenty years. This is largely due to the fact that settlors can use trust protectors to provide more flexibility in trust management, especially for long-term trusts. However, the use of trust protectors is not without some risk. 1 First of all, the legal status of trust protectors is not explicitly recognized in some states. Furthermore, even in those states which do recognize the legality of trust protectors, the nature and extent of their powers is sometimes not always clear. Finally, there is the vexing question of whether trust protectors owe any fiduciary duties, and if so, what the nature of these fiduciary duties may be. In this Article, I will address a number of issues relating to the fiduciary duties of trust protectors.
Part I will briefly discuss the origins and legal status of trust protectors in the United States. Part II will examine the fiduciary duties of trustees and trust advisors in order to determine whether any of the fiduciary obligations imposed by law on other trust officers may be applied to trust protectors as well. In addition, Part II will consider statutes and case law on the subject in both foreign and American jurisdictions. Part III will explore the question of fiduciary duties in more depth and will conclude that the law should impose certain fiduciary duties on trust protectors, such as the duties of good faith, loyalty, impartiality, and independence. ...