Trust Protector Vs Trustee in Louisiana: What’s The Difference?

If you’re setting up a trust or managing one, it’s important to understand the unique responsibilities tied to each role when it comes to a trust protector vs trustee in Louisiana. While both jobs involve making sure the trust operates according to the wishes of its creator, these roles serve very different functions.

What Is a Trust?

46% of Americans have a will, but only 24% have gone the extra mile to create an estate plan, and of those, only 13% have a trust. Trusts are a flexible estate planning tool that lets you transfer your assets to a designated trustee who then manages and distributes them according to your instructions.

What Is a Trustee?

A trustee is a person or institution who is legally responsible for managing all the assets included in a trust. Their job is to manage, invest, distribute, or otherwise oversee the trust according to the terms outlined in the trust document.

In Louisiana, trustees can be either individuals or corporate entities, and they’re expected to be neutral, responsible, and capable of interpreting the terms of the trust to make fair decisions. The trustee’s responsibilities include:

• Collecting and managing trust assets
• Keeping accurate records
• Filing taxes for the trust
• Communicating with beneficiaries
• Distributing assets as instructed in the trust

Trustees are held to high standards of fiduciary duty under Louisiana law, and failure to meet those standards can result in legal consequences or even personal liability.

What Is a Trust Protector?

A trust protector has the power to oversee and, in some cases, correct the actions of a trustee. In essence, a trust protector is the safety net for the trust, especially in long-term or irrevocable trusts where circumstances could change over time.

This person isn’t involved in the day-to-day management of the trust but instead holds certain powers granted in the trust document to intervene in the trustee’s management under specific circumstances. Common powers given to trust protectors include:

• Removing or replacing the trustee
• Modifying the trust to comply with changes in the law
• Approving major trust decisions, like large distributions
• Resolving disputes between beneficiaries and trustees

Unlike the trustee, the trust protector doesn’t owe a fiduciary duty unless the trust explicitly requires it. The trust protector’s powers are highly flexible and depend on what the trust creator included in the trust agreement.

Why Use a Trust Protector in Louisiana?

Adding a trust protector to your trust can provide an extra layer of security and flexibility. In Louisiana, where trust law can be complicated, the trust protector helps make sure that the trust stays aligned with your goals, even if laws change or unexpected problems crop up.

Having a trust protector gives the trust an internal check-and-balance system. This is especially important when:

• The trust is designed to last for many decades
• The beneficiaries are minors or not yet born
• The trust involves significant assets
• The trustee is a bank or third-party company
• The family anticipates changing financial, legal, or personal circumstances

By appointing a trust protector, the creator of the trust can make sure there’s a trusted person ready to intervene if the trustee isn’t doing what they need to do or if the trust becomes outdated.

Risks and Limitations

Even though trust protectors offer many benefits, they’re not without challenges. The powers must be clearly written in the trust document because, without clarity, disagreements can develop between the protector and trustee or among beneficiaries.

Poorly defined roles can also lead to confusion or unintended legal conflicts. That’s why it’s important that the language in the trust is precise to avoid overlaps of power or unintended control shifts.

Another potential issue is overuse. Giving a trust protector too much authority can undermine the trustee’s ability to properly manage the trust. Striking the right balance is key.

FAQs

Q: Can a Trust Protector Be Held Liable for Doing Nothing If the Trustee Mismanages the Trust?

A: In Louisiana, a trust protector can only be held responsible if the trust document assigns a fiduciary duty. Without that duty, the protector might not be liable. However, if their powers include removing a negligent trustee and they fail to act, some legal theories might argue partial responsibility. Each situation depends on the language of the trust.

Q: Can One Person Serve as Both the Trust Protector and the Trustee?

A: Even though it’s technically possible, having one person serve as both trustee and trust protector defeats the purpose of checks and balances. These roles are designed to keep each other accountable, so if the same person holds both roles, there’s very little oversight, and potential misuse of power could go unchecked. It’s usually better to choose two different, trusted individuals or entities with complementary skill sets.

Q: What Happens If a Trust Protector Becomes Unresponsive or Passes Away?

A: If a trust protector becomes unresponsive or passes away, the trust document should name either a backup or a method for appointing a replacement. If no process is listed, Louisiana courts may need to intervene. It’s important to name successors or a method for choosing one, like a vote by beneficiaries or selection by a third party, to avoid delays in trust oversight and decision-making.

Q: Are Trust Protectors Allowed to Change Beneficiary Distributions in Louisiana?

A: Only if the trust document specifically gives them that power. In Louisiana, trust protectors can’t change how assets are distributed without clear authorization. If permitted, they could adjust distributions because of tax law changes, new family circumstances, or legal issues. However, most trust creators limit this authority to prevent misuse and to keep control over how their assets are ultimately shared.

The Shelby Law Firm: Trusted Guidance on Louisiana Trusts

At the Shelby Law Firm, we guide individuals and families through the process of setting up and managing trusts with clarity and care. Whether you need help understanding the role of a trustee or adding a trust protector, our team is here to offer clear, practical support tailored to Louisiana’s unique trust laws.

If you’re unsure how to structure a trust or if you want to review an existing one, our team can walk you through the process.

Sound planning today can prevent confusion and costly litigation tomorrow. Contact us today to schedule a consultation.