Initially used in offshore trusts, a Protector is an individual who, essentially, makes sure a trust’s trustee or company’s manager doesn’t act in bad faith, commit fraud, or otherwise misbehave or act incompetently. In other words, the Protector ‘protects’ trust or company assets in order to give the U.S.-based owner or beneficiary peace-of-mind. The Protector generally has the power to, among other things, veto any action of a manager or trustee, and even replace the manager or trustee if necessary.
The Protector’s role has evolved over time so that s/he is now a more important part of many asset protection programs. A Protector’s responsibilities are especially important in a Kinetic Asset Protection strategy, where, if certain contingencies arise, the Protector has the duty to disassociate a company member or replace a manager or trustee so as to ensure trust/company assets remain outside creditor reach. For such strategies to be most effective, it is important that the Protector be completely independent of the client (meaning s/he should not be an insider under the UFTA) and otherwise has the same characteristics that a good trustee or manager would have. The Protector also must be able to fulfill his contingent obligations completely independent of the client’s control.