Your help is needed to delay Prop 19, also: A review of Trust Protectors

Your help is needed to repeal and temporarily delay Prop 19. I wrote my state senator last December after Prop 19 passed and she is taking action. I told her how many of my clients will see their property taxes multiply when their property transfers to their children on their passing. These are families like yours who have held onto their properties for decades relying on the protections of Proposition 13 and Prop 58 for the last 40 years to see those plans shattered in two short months by a Proposition that was not accurately described on the ballot to voters.

As an example, my widowed client has lived in her Orange County home for decades and has an annual property tax bill of $850. When she dies the property will go to her daughter but the taxes will go up to $16,000 per year. Daughter may have to sell the home that has been in her family for generations. Prop 19 was advertised as "Relief for wildfire victims" and won with 51.3 percent of the vote. Actually very little funds will go to fire victims over the next several years. Prop 19 was heavily lobbied by the California Association of Realtors to cause an increase in home resales when families couldn't afford to pay the property taxes after a loved one dies. I have been in contact with Senator Pat Bates (Orange County) over the last few months and on March 2, 2021 she introduced Senate Bill 668 which will delay the implementation of Prop 19 to February 16, 2023.

As you know, Prop 19 is now in effect, however, if passed, this bill would give families a two year delay to have additional time to plan transfers of real property to their children. There are trust structures that can protect your family. I was able to help a handful of families in the short time they gave us before the law took effect February 16, 2021. The two year delay would also give the tax assessor time to clarify ambiguities in the law. SB 668 will NOT affect the base year value transfer provisions that become operative on April 1, 2021. What can you do? Please write a letter to your state senator to urge them to support SB 668. Senator Bates asks that you copy her with your letters of support. Ask everyone you know to write letters too. Prop 19 affects democrats and republicans alike. We can get this legislation passed and allow your property to stay in your family. Spread the word. If you do not know who you state senator it please reply to this email and I will send you a link with their contact info. If you are a property owner, you will want to act now. Thank you for your attention to this time sensitive matter. My regular newsletter topic follows.


What Is a Trust Protector?

Traditionally, the three roles that must be filled when setting up a trust are the settlor (also called a grantor, trustor, or trustmaker), the trustee, and the beneficiary. All three roles are necessary to create a trust that functions properly. Although it is relatively common to use trust protectors in foreign asset protection trusts, a trust protector is a fairly new role in trusts drafted in the United States for estate planning purposes. However, as the number of trusts designed to last for generations grows, estate plans need more built-in flexibility. Giving a trust protector, through the terms of the trust, certain powers over the trust, such as removing or appointing trustees, adding or removing beneficiaries, and amending or even terminating the trust, ensures that your intentions for creating the trust are fulfilled despite changing law or circumstances.

How Is a Trust Protector Selected?

A settlor may select as a trust protector any individual or group of individuals, such as family members, business associates, friends, attorneys, accountants, or other professional advisors. The naming of a trust protector may be specific, such as “my neighbor John Doe,” or general, such as “a CPA selected by the majority of the owners of the [ABC CPA Firm].” The settlor provides for and selects a trust protector in the trust agreement.

Who Makes a Good Trust Protector?

Because of the many and varied powers that a trust protector can hold, you should name a trust protector who has attributes, knowledge, or skills suitable for the responsibilities of the role. For example, if the trust protector has the power to amend the terms of the trust to account for changes in tax law, the trust protector should have some understanding of tax law and how it will impact the trust. If a trust protector has the power to veto or direct trust distributions to beneficiaries, the selected trust protector should understand the family history and desires of the settlor. Different powers may require the selection of different trust protectors or possibly a committee of trust protectors.

What Does a Trust Protector Do?

Based on your wishes, the purposes of the trust, and applicable laws, the trust protector can hold many different powers, including administrative powers traditionally held by a trustee, such as the power to make distributions, and judicial powers traditionally held by a court, such as the power to remove beneficiaries. Trust protector powers can include the power to

  • remove a trustee or appoint a successor trustee,
  • add or remove beneficiaries,
  • amend the trust agreement,
  • exercise the voting rights of closely held business interests owned by the trust,
  • interpret the terms of the trust,
  • veto or direct trust distributions,
  • terminate the trust, and
  • appoint and remove members of a distribution or investment committee.

This list is not exhaustive, and you should include any of these or other trust protector powers only after careful consideration of your desires and purposes for creating the trust.

Reasons for Including a Trust Protector in Your Trust-Based Estate Plan

There are several reasons to include a trust protector in your trust-based estate plan:

  • Trust protectors offer increased flexibility and peace of mind. The administration of a perpetual trust that may last for generations can be a daunting task because no one knows what the future may hold. Including trust protector provisions in your trust agreement can ensure that your trust achieves your goals despite changing circumstances and laws.
  • Trust protectors can provide additional oversight and support for a trustee. A trust protector can ensure that a trustee is properly administering the trust and carrying out the trust’s purposes. If the trustee is delinquent in its duties, a trust protector may remove the trustee and appoint a better-suited trustee. A trust protector can also help a trustee correctly interpret trust provisions and address changes in the law or beneficiary circumstances.
  • Trust protectors provide an easier and less costly means of modifying a trust. If a trust needs to be modified after the settlor’s death, usually the only route is through the court system, a complicated and costly process. Giving a trust protector the power to modify the terms of a trust can prevent the need to go to court to modify the trust. 

Can I Name a Trust Protector for a Testamentary Trust?

A testamentary trust, usually created through a will, comes into existence after the settlor dies and the will has been probated. A testator (the person who makes the will) can, and in many cases should, include trust protector provisions in a testamentary trust to ensure that their  intent for the trust is properly carried out over time.

Does Every State Allow Trust Protectors?

State law varies in its treatment and classification of, and guidance for, trust protectors. Though many states have adopted a uniform set of laws governing trust protectors, or a modified version of these uniform laws, other states have not addressed trust protectors at all. It is important to consult an attorney familiar with your state’s laws to understand whether trust protector provisions are right for you and your goals.

We Are Here to Help

Please contact us to learn more about naming a trust protector and discuss whether it is a good idea for you. We are happy to answer any questions you may have and help you craft an estate plan that is perfect for you and for your loved ones.

Ocean Estate Law

Jennifer Elliott, Attorney at Law

Jennifer Elliott, Attorney at Law is an estate planning and probate lawyer located in San Clemente and Laguna Hills. The firm, Ocean Estate Law, provides probate services for decedent's estates in Orange County and San Bernardino County as well as estate planning to clients throughout California.