The Protector is a critical appointment in any asset protection structure. The powers given to a Protector in the trust deed normally include a standard power to remove and appoint trustees. This power is the ultimate control connecting the settlor with the trust and gives the settlor comfort that the trust will be administered in accordance with his wishes. However, the same power may also create a weakness in an asset protection structure.
A Protector residing within the jurisdiction of a US Court hearing a challenge to the trust may be forced by a Court order to remove the offshore trustee and to appoint in its place a domestic trustee within the US Court’s jurisdiction. There are also other orders that might be sought against a Protector to weaken an asset protection structure. It is critical therefore that (at least during the period when there is a threat to the trust), the Protector not be resident within the jurisdiction of the Court.
There are also situations when it is necessary for the Protector to act of its own initiative to protect the trust against litigation. For example, if there is a domestic trustee or co-trustee within the US Courts jurisdiction the Protector may need to remove that trustee to insulate the trust from any actions bought in that Court. The Protector similarly must not be exposed to orders of that Court preventing it taking such action.
These powers of a Protector must therefore be looked at carefully when a new trust is drafted. The power to veto trustee’s decisions must be exactly that, and not a power to approve trustee’s decisions. Consideration must also be given to the extent of Protectors powers. In some cases, it may be advisable to appoint an independent Protector.
Trustees & Fiduciaries (Cook Islands) Ltd (T&F) has a depth of experience in trust litigation giving it a unique ability to perform the duties of a Protector in difficult cases. This service is provided via a wholly owned and controlled subsidiary, T&F Protectors Ltd.
T&F Protectors Ltd will also accept appointment as a Protector of trusts domiciled in other jurisdictions. In these situations T&F will need to carry out a review of the trust document and the relevant law in that jurisdiction before accepting appointment.
Trustees & Fiduciaries (Cook Islands) Ltd is a Cook Islands Trustee Company offering in depth knowledge of Cook Islands Trust and Corporate services. Contact us for further information at email@example.com or phone +682 29214.