Do we need a Protector for our Trust?

Why are Protectors so important for your trust? Find out all about the role of Protectors and their importance.

The role of the ‘Protector’ emanates from English law, from the Fines The role of the ‘Protector’ emanates from English law, from the Fines and Recoveries Act 1833, but has of late assumed a wider role in the sphere of trust law. The Protector is in modern times, considered to be an ombudsman based on how a trust is administered and is ordinarily required to give his consent to specific actions required to be carried out by the trustee, whereby such actions are normally accounted for in the trust deed.

Under Maltese law, the Protector is regulated by Article 24A of the Trusts and Trustees Act, Chapter 331 of the laws of Malta (hereinafter the ‘Act’) and the foremost element to be considered lies in the fact that the existence of the Protector should be created in the trust deed, for the latter role to take effect. A Protector, usually appointed by the settlor as an independent person to the trust generally has the power to remove the trustee and further appoint a new and/or additional trustee and may also be granted other powers under the trust instrument, whereby the trustee would be required to obtain the consent of the Protector before carrying out certain actions. For instance, the prior written consent of the Protector may be required if the trustee wishes to make an investment and/or distribute income or capital; appoint investment managers, professional advisory or beneficiaries, and/or the removal of the same. The extent of the powers given to the Protector is normally determined in the trust instrument.

The Protector is generally appointed by the settlor for the latter to be able to oversee how the trustee administers the trust, particularly in situations where the settlor and trustee are resident in different jurisdictions, to determine whether such administration is satisfactory and in default to remove the trustee and appoint an alternative. The Protector is not considered to be a trustee and therefore does not appear to have fiduciary obligations towards the beneficiaries but rather supervises the role and administration of trustees. The extent of the powers given to the Protector may differ according to what is stipulated in the trust deed and may depend on several factors. For instance, in situations where the trustee is a small company in an offshore jurisdiction, the Protector will be given more far-reaching powers than in the case of a Protector appointed for a trust, where the settlor and the trustee are in the same jurisdiction or the trustee is a well-known and well-reputed corporate body. Ultimately, it is the instrument of trust as drafted by the lawyer and agreed to between the Settlor and Trustee that determines the existence of the role of the Protector and the extent of the powers of the latter.