What a Trust Protector Can Do
A trust protector is someone named in the trust document who holds specific powers over the trust, separate from the trustee. Arizona law recognizes trust protectors and allows them a wide range of authority, depending on what the trust instrument grants.
A trust protector appointed by the trust instrument has the powers, delegations and functions conferred on the trust protector by the trust instrument. These powers, delegations and functions may include the following: 1. Remove and appoint a trustee. 2. Modify or amend the trust instrument for any valid purpose or reason, including, without limitation, to achieve favorable tax status or to respond to changes in the internal revenue code or state law.
A.R.S. § 14-10818(B)Trust protectors can also increase, decrease, or modify beneficiary interests, change the governing law of the trust, and modify powers of appointment. These powers make the trust protector a valuable safeguard when circumstances change after the trust is created.
Limits and Liability
The statute places two important guardrails on trust protector modifications. A trust protector generally cannot grant a beneficial interest to someone not already provided for in the trust, and cannot modify the beneficial interest of a governmental unit in a special needs trust, unless the trust instrument says otherwise.
Except to the extent otherwise specifically provided in the trust instrument, a modification authorized under subsection B of this section may not: 1. Grant a beneficial interest to an individual or a class of individuals unless the individual or class of individuals is specifically provided for under the trust instrument.
A.R.S. § 14-10818(C)Perhaps most notably, a trust protector is not a trustee or fiduciary under Arizona law. That means the trust protector is not held to the same standard of liability as a trustee when exercising or failing to exercise their designated powers. This distinction matters because it allows the trust protector to act independently without the full weight of fiduciary obligations that apply to trustees.
