Regularizing the Trust Protector

Author:Paul B. Miller
Position:Professor of Law, Notre Dame Law School
Pages:2097-2118
SUMMARY

Increasingly, settlors of trusts in on-shore jurisdictions are making use of trust protectors. Protectors serve a variety of functions but generally speaking they are appointed to provide additional security for settlors' expectations that trusts will be administered in accordance with their intentions. Given the potential breadth and variety of functions performed and powers wielded by... (see full summary)

 
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2097
Regularizing the Trust Protector
Paul B. Miller*
ABSTRACT: Increasingly, settlors o f trusts in on-shore jurisdictions are
making use of trust protectors. Prot ectors serve a variety of func tions but
generally speaking they are app ointed to provide additional sec urity for
settlors’ expectations that trust s will be administered in accorda nce with their
intentions. Given the potential breadth and variety of functions pe rformed
and powers wielded by protectors, their use generate s important and profound
theoretical issues. Taking its cues fro m recent efforts to regularize trust
protection, this Article addresses questio ns concerning the extension of
fiduciary duties to trust protectors. Amo ngst other things, it questions th e
tenability of proposals for broad extension of fiducia ry status to protectors and
advocates a structured, fact-based approach to fiduciary characteriza tion of
trust protection mandates accor ding to which they may be considered fiduciary
only if and to the extent they implicate fid uciary powers.
I. INTRODUCTION ......................................................................... 2097
II. THE PROBLEM: THE (ALMOST) INFINITE VARIABILITY
OF TRUST PROTECTION ............................................................. 2102
III. PROPOSED SOLUTIONS, AND THE IR LIMITATIONS ..................... 2106
IV. AN ALTERNATIVE ...................................................................... 2113
V. CONCLUSION ............................................................................ 2118
I. INTRODUCTION
Trust protectors are an orphan of the law, and only slightly less so, of
legal scholarship. The fiduciary regulation of conve ntionally structured trusts
(i.e., those that feature a settlor, trustee(s), and beneficiaries) has drawn
* Professor of Law, Notre Dame Law School. I am very grateful for comments from Tom
Gallanis, Alexandra Popovici, Rob Sitkoff, and Lionel Smith. I am also appreciative of feedback
from fellow symposiasts at the Iowa Law Review Wealth Transfer Law in Comparative and International
Perspective Symposium held at the University of Iowa Colle ge of Law. Further comments would be
most welcome at: paul.miller@nd.edu.
2098 IOWA LAW REVIEW [Vol. 103:2097
considerable attention. The peculiaritie s associated with fiduciary regulation
of conventionally structured charitable trusts are also given thorough
treatment.1 Partly as a result, many trusts scholars hold that fiduciary
administration lies within the otherwise disputed “core” of the common law
trust, even as they disagree about particular facets of trust fiduciary
administration.2 Equally, and not surprisingly, most general treatments of
fiduciary law take the trust as conventionally structured as a paradigmatic kind
of fiduciary arrangement. It is taken for granted that trusteesand no one
else, for the purposes of trust laware fiduciaries of trust bene ficiaries (or of
trust purposes). Likewise, it is taken f or granted that the fiduciary regulation
of trusts ought to be primarily focused on protectin g beneficiaries.
Trust protectors disrupt common assumptions about the fiduciary
administration of trusts.3 Protectors are interpolated between trustees and
beneficiaries (or, in the case of charitable trusts, regulators) in the
administration of trusts. Genera lly speaking, protectors provide enhanced
protection for settlor intent.4 But, unlike parties to the conventionally
structured trust, the status of the protector is largely undefin ed by law. It is
instead left to the fertile minds of lawyers. Protectors may be granted a variety
of powers (and, indeed, forms of standing not premised on the possession
1. See, e.g., Henry Hansmann, The Role of Trust in Nonprofit Enterprise, in THE STUDY OF
NONPROFIT ENTERPRISE: THEORIES AND APPROACHES 115, 11821 (Helmut Anheier & Avner Ben-
Ner eds., 2003) (examining the role and responsibilities of fiduciaries in the charitable trust
context); Rob Atkinson, Unsettled Standing: Who (Else) Should Enforce the Duties of Charitable
Fiduciaries?, 23 J. CORP. L. 655, 661 (1998); Evelyn Brody, The Limits of Charity Fiduciary Law,
57 MD. L. REV. 1400, 141823 (1998); James J. Fishman, Improving Charitable Accountability,
62 MD. L. REV. 218, 22831 (2003); Harvey J. Goldschmid, The Fiduciary Duties of Nonprofit Directors
and Officers: Paradoxes, Problems, and Proposed Reforms, 23 J. CORP. L. 631, 63849 (1998); Geoffrey
A. Manne, Agency Costs and the Oversight of Charitable Organizations, 1999 WIS. L. REV. 227,
23740; Jeremy Benjamin, Note, Reinvigorating Nonprofit DirectorsDuty of Obedience, 30 CARDOZO
L. REV. 1677, 1687 (2009).
2. See Thomas P. G allanis, The Contribution of Fiduciary Law, in THE WORLDS OF THE TRUST
388, 39094 (Lionel Smith ed., 2013); David Hayton, The Irreducible Core Content of Trusteeship, in
TRENDS IN CONTEMPORARY TRUST LAW 47, 4852 (A.J. Oakley ed., 1996); Ro bert H. Sitkoff, Trust
Law as Fiduciary Governance Plus Asset Partitioning, in THE WORLDS OF THE TRUST, supra, at 428,
43034; Daniel Clarry, The Irreducible Core of the Trust 2224 (August 2011) (unpublished
LL.M. thesis, McGill University Faculty of Law) (on file with ProQuest Disser tations Publishing).
3. See generally Terence Tan Zhong Wei, The Irreducible Core Content of Modern Trust Law,
15 TR. & TRUSTEES 477 (2009) (desc ribing the ways in which protectors challenge the
understanding of trusts).
4. Lawr ence A. Frolik, Trust Protectors: Why They Have Become “The Next Big Thing”, 50 REAL
PROP. TR. & EST. L.J. 267, 27682 (2015); see also John F. Wasik, Guardians of Trusts, N.Y. TIMES
(Mar. 12, 2014), https://www.nytimes.com/2014/03/13/business/retirementspecial/guardians-
of-trusts.html (“T[he] legacy part of retirement can be unsettling. If you have planned carefully and
set up trusts and wills, yo u still might have some nagging doubts about how your wishes will be
carried out after you are gone. Say you have appointed a trustee you think you can confide in and
who understands your inten tions. What happens if that trustee turns o ut to be less trustworthy or
dies, or if estate laws ch ange? Then you might need a third par ty called a ‘trust protector.’”).

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