Many trusts provide for the appointment of a trust protector. A trust protector carries out strategic and administrative duties not held by the other traditional trust roles. Unlike the traditional trust roles (settlor, trustee, and beneficiary), the trust protector role adds flexibility and adaptability to the trust structure because the trust protector usually can choose whether to act and can have a variety of essential duties.

Usually the terms of the trust specifically appoint a trust protector and explain which duties he will have. Trust protectors may, if the trust so provides:

• Remove trustees
• Appoint new or additional trustees;
• Remove any beneficiary as a beneficiary of the trust
• Add any person as an additional beneficiary of the trust
• Give consent or withhold consent to specified actions of the trustee
• Determine the proper law governing the trust
• Change the forum for administration of the trust
• Release any powers of the trust protector

Trustee Act, Section 81. Many of these actions would create conflicts of interest for the trustee or otherwise be difficult to perform in the trustee role. The settlor may not want to give himself the power to take these actions because he does not want to be actively involved in the trust.

Trust protectors will not be considered trustees just because they exercise certain powers, and they will not be liable to beneficiaries for a bona fide exercise of powers unless provided in the trust language.  In addition, trust protectors should not hold any trust property because of the potential for a conflict of interest. Trust protectors may not receive any payment for their services except as listed in the trust deed .

Trust settlors often choose to use a trust protector when they are creating long-term family trusts, want to avoid seeking court help when disputes arise, and yet see the need for flexibility in the future to adapt to changing times. Trusts might also include a trust protector because trust assets are complex or unusually risky or because the trustee does not have the expertise to manage specialized assets such as artwork or a working business.

Courts and attorneys worldwide are still developing the law on trust protectors, including the question of whether they hold fiduciary duties in relation to the trust and beneficiaries. If you plan to appoint a trust protector for your trust, consult an attorney to determine the current state of the law.

To find out more about trusts in The Bahamas, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.