This note provides a brief outline of the role of protector in the context of trusts in Jersey, as well as setting out who can be a protector and what powers a protector can have.
What is a Protector?
The protector of a trust is not a trustee, but a person who has some control over how a trustee exercises his powers. In other words, they are there as a watchdog, to ensure that the trustee exercises its administrative and dispositive powers properly, and that it gives proper weight to the settlor’s wishes.
The protector is usually appointed by the settlor, who will have set out in the trust document the areas which he wants the protector to oversee. In Jersey there is no particular significance to, or statutory definition of, the word ‘protector’; the same position has sometimes been described as an ‘adviser’, ‘appointed person’, ‘appointor’ or ‘guardian’. Nevertheless, ‘protector’ is the most common title.
Whichever term is chosen, the protector will be named in the trust document. Often this is by reference to a particular individual or company (for example, ‘Joe Bloggs’ or ‘ABC Limited’), but it is also possible to define the position by reference to an office that may be held by different people over time (for example, ‘the person appointed under clause X’ of the trust document).
There is no legal requirement to appoint a protector when creating a trust, and indeed many trusts do not have protectors. It is very much up to the settlor to decide whether or not he wishes to have one. Where the trust document does provide for a protector, however, the purpose of the role is to exercise various supervisory or protective powers in relation to the way the trustee administers the trust. For this reason some settlors will find the idea of having a protector attractive, because by doing so they can retain a certain amount of supervision over the trust.
Who should be a protector?
The choice of who to appoint as protector is very wide. The settlor can reserve the power to himself or he can appoint a beneficiary or any other third party to the position. The only likely restriction is that the protector would not normally also be a trustee, as this would defeat the purpose of having a separate role, but there is no legal restriction on this.
It is common for the settlor to choose a trusted friend or relative as his protector, especially where (as is usually the case) the settlor is not himself based in Jersey and he has appointed an institutional trust company as trustee. For example, if the assets of the trust included shares in the family business, the settlor would probably want to maintain some sort of personal connection to the trust’s administration, which could be achieved in this way. On the other hand, the settlor might prefer to appoint a professional who would perhaps be more likely to act impartially in the event of a family dispute, whether among the beneficiaries or between the trustee and a beneficiary.
What can a protector do?
Whoever he is, a person’s appointment as protector will normally give rise to a fiduciary relationship, meaning that he will owe a duty of care to the beneficiaries. Whenever the protector’s involvement is required, he must consider what course of action is in their best interests, and act accordingly. The protector is therefore subject to these duties and the Jersey courts have the right to remove any protector who is not complying with them.
Although the courts have not yet fully delineated the exact circumstances in which a protector can bring legal proceedings, it is generally accepted that he has standing to do so in any matter relating to the exercise of his powers under the trust or in any matter where his powers are relevant.
A protector's powers are primarily derived from the trust document itself; in Jersey there is no statutory list that automatically provides them. Depending on the settlor’s views, the trust deed can confer a wide variety of powers or functions on the protector, which can be either positive (compelling the trustees to do something), or negative (prohibiting the trustees from doing something unless the protector consents).
Examples of positive powers include the appointment or removal of trustees, directing the trustee to act in a certain way, adding or removing beneficiaries and transferring the trust to a different jurisdiction. Negative powers typically involve requiring the protector’s consent before the trustee can do something, for example, making investments, transferring assets to beneficiaries and amending the class of beneficiaries or terms of the trust generally. Having said that, sometimes all the trustee has to do, in relation to the protector, is to inform him that it intends to take a particular action.