Irrevocable trusts are a popular tool in estate planning, since they offer a secure and private way to transfer assets to the next generation while minimizing the tax impact on one’s estate. These types of trusts have a lot of benefits with one major caveat – the person creating the trust must give up control of the trust and the assets. This means they must appoint a third party trustee to manage the trust on behalf of the beneficiaries. Trustees have been the primary source of management for trusts in the past, but recently as trust and tax laws have been changing, more people are seeing a need for a second set of eyes in the form of a trust prosecutor.
The concept of a trust prosecutor is a good one – to act as a watchdog to the trustee. Having two sets of eyes analyzing the management of the trust is certainly better than one, and providing oversight for a trustee can offer helpful peace of mind for the settlor of the trust. Trust prosecutors can also be vested with increased power, such as changing the terms of a trust without having to go to court.
However, all of this assumes that the trust prosecutor is at least at honest and capable at the trustee, if not more so. For many people engaging in the estate planning process, this can present a challenge since it may be difficult to find those individuals and convince them to agree to this duty. This is why a lot of people choose to engage with professional trustees or other estate planning professionals. Professionals, particularly lawyers, are bound by strict rules of professional responsibility and in addition are a dispassionate third party who can advocate for the rules set out in the trust without finding themselves involved in family politics.
Source: New York Times, “Guardians of Trusts,” John F. Wasik, March 12, 2014.