TRUST PROTECTOR AGREEMENT

State of New Mexico

Under the New Mexico Uniform Directed Trust Act, NMSA § 46-14-1 et seq.

ARTICLE I — PARTIES AND RECITALS

THIS TRUST PROTECTOR AGREEMENT ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and among:

Section 1.1 — Recitals

WHEREAS, the Grantor established the [________________________________] ("Trust") on [__/__/____] pursuant to the laws of the State of New Mexico;

WHEREAS, the Trust instrument authorizes the appointment of a Trust Protector to serve as a "trust director" within the meaning of the New Mexico Uniform Directed Trust Act, NMSA § 46-14-2;

WHEREAS, New Mexico has adopted the Uniform Directed Trust Act ("UDTA"), codified at NMSA § 46-14-1 et seq., with conforming amendments to the New Mexico Uniform Trust Code (NMSA Chapter 46A);

WHEREAS, under the UDTA, a "trust director" means a person who is granted a power of direction by the terms of the trust, and includes a person serving under the title of trust protector, trust advisor, investment director, distribution director, or similar designation;

WHEREAS, under NMSA § 46-14-8, a trust director has the same fiduciary duty and liability in the exercise or nonexercise of a power of direction as a trustee in a like position and under similar circumstances;

WHEREAS, the Grantor desires to appoint the Trust Protector to serve as a trust director under the UDTA and to define the scope of the Trust Protector's authority; and

WHEREAS, the Trust Protector is willing to accept such appointment subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows:

ARTICLE II — APPOINTMENT AND ACCEPTANCE

Section 2.1 — Appointment

The Grantor hereby appoints [________________________________] as Trust Protector of the Trust, effective as of the Effective Date. The Trust Protector shall serve as a "trust director" within the meaning of NMSA § 46-14-2, holding a "power of direction" as defined therein.

Section 2.2 — Acceptance

The Trust Protector hereby accepts the appointment and agrees to exercise the powers granted hereunder in accordance with this Agreement, the Trust instrument, and applicable New Mexico law, including the UDTA and the New Mexico Uniform Trust Code.

Section 2.3 — Effective Period

This appointment shall remain in effect until terminated in accordance with Article IX of this Agreement.

ARTICLE III — POWERS OF THE TRUST PROTECTOR

Section 3.1 — Designated Powers

Pursuant to NMSA § 46-14-5 and § 46-14-6, the Trust Protector shall have the following powers of direction. Select all that apply:

Trust Modification and Amendment Powers:

☐ Modify or amend administrative provisions of the Trust to respond to changes in federal or New Mexico law, including tax law changes
☐ Amend the Trust instrument to correct scrivener's errors, ambiguities, or drafting deficiencies
☐ Modify the Trust to achieve more favorable tax treatment under the Internal Revenue Code or New Mexico tax provisions
☐ Change the situs of the Trust to another jurisdiction, including amending the governing law provision
☐ Direct modification of the Trust under changed circumstances pursuant to NMSA § 46A-4-412
☐ Exercise decanting authority as permitted under the New Mexico Uniform Trust Decanting Act

Trustee-Related Powers:

☐ Remove and replace the Trustee, with or without cause
☐ Appoint successor or additional Trustees
☐ Resolve disputes among Co-Trustees and break deadlocks
☐ Approve Trustee compensation and fee schedules
☐ Direct the Trustee to engage or terminate professional advisors

Beneficiary-Related Powers:

☐ Add or remove beneficiaries of the Trust, subject to Section 3.3
☐ Modify, expand, or restrict the terms of any power of appointment granted to a beneficiary
☐ Adjust beneficial interests among existing beneficiaries
☐ Approve or veto discretionary distributions to beneficiaries
☐ Establish or modify distribution standards

Investment and Administrative Powers:

☐ Direct or veto investment decisions or modify the investment policy
☐ Approve or direct the acquisition, retention, or disposition of specific Trust assets
☐ Direct changes to the Trust's investment strategy or asset allocation
☐ Authorize the Trustee to engage in transactions that would otherwise constitute self-dealing

Termination and Distribution Powers:

☐ Terminate the Trust, in whole or in part
☐ Direct early termination and distribution of Trust assets
☐ Divide the Trust into sub-trusts or merge sub-trusts
☐ Direct termination of an uneconomic trust pursuant to NMSA § 46A-4-414

Dispute Resolution Powers:

☐ Interpret ambiguous provisions of the Trust instrument, with binding effect
☐ Mediate or resolve disputes among beneficiaries
☐ Authorize or direct legal proceedings on behalf of the Trust

Other Powers:

☐ Other: [________________________________]
☐ Other: [________________________________]

Section 3.2 — Exercise of Powers

All powers shall be exercised by the Trust Protector in writing, delivered to the Trustee in accordance with Article XI. Pursuant to NMSA § 46-14-9, the Trustee shall take reasonable action to comply with the Trust Protector's exercise or nonexercise of a power of direction, and the Trustee is not liable for the action unless compliance would constitute willful misconduct by the Trustee.

Section 3.3 — Limitations on Powers

The Trust Protector shall NOT:

(a) Exercise any power for the personal benefit of the Trust Protector, except as expressly authorized in the Trust instrument;
(b) Make distributions to the Trust Protector or for the Trust Protector's benefit unless expressly authorized;
(c) Exercise any power in a manner that would cause inclusion of Trust assets in the Trust Protector's gross estate for federal estate tax purposes;
(d) Exercise any power in a manner that would be treated as a general power of appointment under I.R.C. § 2041 or § 2514;
(e) Simultaneously serve as Trustee and Trust Protector unless the Trust instrument expressly permits dual service;
(f) Add the Trust Protector, the Trust Protector's creditors, the Trust Protector's estate, or the creditors of the Trust Protector's estate as beneficiaries of the Trust; or
(g) Exercise powers in a manner inconsistent with the Trust's stated purposes or the interests of the beneficiaries.

ARTICLE IV — STANDARD OF CONDUCT AND FIDUCIARY STATUS

Section 4.1 — Fiduciary Classification

Under NMSA § 46-14-8(1), a trust director has the same fiduciary duty and liability in the exercise or nonexercise of a power of direction as a trustee in a like position and under similar circumstances. The Trust Protector's fiduciary status shall be as follows (select one):

☐ Full Fiduciary Capacity (Statutory Default): The Trust Protector shall exercise all powers subject to the same fiduciary duty and liability as a trustee in a like position and under similar circumstances, as provided in NMSA § 46-14-8(1).

☐ Modified Fiduciary Capacity: Pursuant to NMSA § 46-14-8(2), the Trust instrument modifies the duty and liability of the Trust Protector as follows: [________________________________]. Such modifications are limited to the same extent as modifications of a trustee's duties under NMSA § 46A-1-105.

☐ Non-Fiduciary Capacity (Limited): To the extent permitted under New Mexico law and the terms of the Trust instrument, the Trust Protector shall exercise the following powers in a non-fiduciary capacity: [________________________________]. The Trust Protector shall still be required to act in good faith.

Section 4.2 — Standard of Care

The Trust Protector shall:

(a) Act in good faith and in accordance with the terms and purposes of the Trust, consistent with NMSA § 46A-8-801;
(b) Act in the best interests of the beneficiaries;
(c) Exercise reasonable care, skill, and caution in performing duties hereunder;
(d) Administer the powers granted hereunder as a prudent person would;
(e) Avoid conflicts of interest; and
(f) Not engage in self-dealing with respect to Trust assets.

Section 4.3 — Information Rights

Pursuant to NMSA § 46-14-10, the Trustee shall provide the Trust Protector with information reasonably necessary for the Trust Protector to exercise any power of direction. The Trust Protector shall have the right to:

(a) Review Trust records, including accountings, tax returns, and investment reports;
(b) Request and receive information from the Trustee regarding Trust administration;
(c) Communicate with Trust beneficiaries regarding matters within the Trust Protector's authority; and
(d) Engage independent advisors at the Trust's expense, subject to reasonableness.

Section 4.4 — No Duty to Monitor

Pursuant to NMSA § 46-14-11, except as otherwise provided in this Agreement or the Trust instrument:

(a) The Trust Protector has no duty to monitor the Trustee or any other trust director;
(b) The Trust Protector has no duty to inform or give advice to the Trustee or any beneficiary; and
(c) The Trustee has no duty to monitor the Trust Protector or provide advice to the Trust Protector.

ARTICLE V — COMPENSATION

Section 5.1 — Compensation Amount

The Trust Protector shall be compensated as follows (select one):

☐ Fixed Annual Fee: $[____] per year, payable ☐ monthly ☐ quarterly ☐ annually
☐ Hourly Rate: $[____] per hour for time actually spent performing Trust Protector duties
☐ Percentage of Trust Assets: [____]% of the net fair market value of Trust assets, calculated as of [________________________________]
☐ Per-Action Fee: $[____] per formal action taken as Trust Protector
☐ Reasonable Compensation: Reasonable compensation as determined by the Trustee and Trust Protector, consistent with prevailing rates for similar services in New Mexico
☐ No Compensation: The Trust Protector shall serve without compensation
☐ Other: [________________________________]

Section 5.2 — Expense Reimbursement

The Trust Protector shall be entitled to reimbursement from the Trust for all reasonable and necessary expenses incurred in the performance of duties hereunder, including but not limited to legal fees, accounting fees, travel expenses, and costs of independent professional advisors.

Section 5.3 — Payment Source

All compensation and expense reimbursements shall be paid from Trust assets and shall constitute a proper Trust expense.

ARTICLE VI — LIABILITY AND INDEMNIFICATION

Section 6.1 — Limitation of Liability

Subject to NMSA § 46-14-8 and the fiduciary classification selected in Section 4.1:

(a) The Trust Protector shall not be personally liable for any action taken or omitted in good faith and in accordance with this Agreement and the Trust instrument;
(b) The Trust Protector shall not be liable for any loss to the Trust resulting from the Trustee's failure to comply with a proper direction;
(c) The Trust Protector shall be liable only for willful misconduct, gross negligence, or breach of the applicable fiduciary duty; and
(d) Liability shall be limited to the Trust assets under administration.

Section 6.2 — Indemnification

The Trust shall indemnify, defend, and hold harmless the Trust Protector from and against all claims, liabilities, losses, damages, costs, and expenses (including reasonable attorney fees) arising out of or related to the Trust Protector's exercise or nonexercise of powers hereunder, except to the extent caused by the Trust Protector's willful misconduct or gross negligence. This indemnification shall:

(a) Be payable from Trust assets;
(b) Survive the termination of this Agreement;
(c) Survive the Trust Protector's resignation or removal; and
(d) Extend to the Trust Protector's heirs, executors, and personal representatives.

Section 6.3 — Defenses

Pursuant to NMSA § 46-14-14, the Trust Protector shall be entitled to assert any defense available to a trustee in a like position and under similar circumstances in any action brought against the Trust Protector for breach of duty.

Section 6.4 — Limitations Period

Any action against the Trust Protector for breach of duty shall be subject to the same limitations period applicable to actions against a trustee under NMSA § 46-14-13 and NMSA § 46A-10-1005.

ARTICLE VII — SUCCESSION

Section 7.1 — Successor Trust Protector

In the event of the Trust Protector's death, incapacity, resignation, or removal, a successor Trust Protector shall be appointed by the following method (select one or more in order of priority):

☐ The Grantor (if living and competent) shall appoint a successor
☐ The outgoing Trust Protector shall designate a successor in writing
☐ The Trustee shall appoint a successor
☐ A majority-in-interest of the current income beneficiaries shall appoint a successor
☐ A designated third party: [________________________________] shall appoint a successor
☐ The [________________________________] County District Court of New Mexico shall appoint a successor upon petition
☐ Other method: [________________________________]

Section 7.2 — Qualifications of Successor

Any successor Trust Protector shall:

(a) Be a natural person over the age of [____] years or a corporate entity authorized to serve in a fiduciary capacity;
(b) Not be a beneficiary of the Trust, unless the Trust instrument expressly permits;
(c) Be a resident of the United States; and
(d) Possess the qualifications set forth in the Trust instrument, if any.

Section 7.3 — Interim Period

During any vacancy in the office of Trust Protector, the powers granted hereunder shall be suspended and the Trustee shall administer the Trust in accordance with its terms, exercising independent judgment on all matters that would otherwise require Trust Protector direction.

ARTICLE VIII — REPORTING AND COMMUNICATION

Section 8.1 — Notice of Actions

The Trust Protector shall provide written notice to the Trustee and to all qualified beneficiaries (as defined under NMSA § 46A-1-103) within [____] days of exercising any power under Article III, unless the Trust instrument provides otherwise.

Section 8.2 — Annual Report

The Trust Protector shall provide an annual written summary of all actions taken or decisions made during the preceding calendar year to:

☐ The Grantor (if living)
☐ The Trustee
☐ All current income beneficiaries
☐ All qualified beneficiaries
☐ Other: [________________________________]

Section 8.3 — Records

The Trust Protector shall maintain records of all actions taken, decisions made, and communications with the Trustee and beneficiaries for a period of not less than [____] years.

ARTICLE IX — RESIGNATION AND REMOVAL

Section 9.1 — Resignation

The Trust Protector may resign by providing written notice to the Trustee and to all qualified beneficiaries not less than [____] days prior to the effective date of resignation. The resignation shall be effective upon the earlier of:

(a) Appointment and acceptance by a successor Trust Protector; or
(b) Expiration of the notice period specified above.

Section 9.2 — Removal

The Trust Protector may be removed as follows (select all that apply):

☐ By the Grantor (if living and competent), with or without cause
☐ By a unanimous vote of all current income beneficiaries, for cause
☐ By a majority-in-interest of all qualified beneficiaries, for cause
☐ By order of a New Mexico District Court upon petition and finding of cause
☐ By a designated third party: [________________________________]
☐ Other: [________________________________]

Section 9.3 — Definition of Cause

For purposes of this Article, "cause" shall include: (a) breach of fiduciary duty; (b) incapacity; (c) failure to act when action is required; (d) conviction of a felony; (e) sustained substance abuse; or (f) a material conflict of interest that cannot be waived.

ARTICLE X — DISPUTE RESOLUTION

Section 10.1 — Mediation

Any dispute arising under this Agreement or the Trust instrument relating to the Trust Protector's authority shall first be submitted to mediation before a qualified mediator in [________________________________] County, New Mexico. The costs of mediation shall be paid from Trust assets.

Section 10.2 — Judicial Resolution

If mediation fails to resolve the dispute within [____] days, any party may petition the District Court of [________________________________] County, New Mexico for resolution.

Section 10.3 — Arbitration (Optional)

☐ The parties agree that any dispute not resolved through mediation shall be submitted to binding arbitration in accordance with the rules of [________________________________], conducted in [________________________________], New Mexico. The arbitrator's decision shall be final and enforceable in any court of competent jurisdiction.

ARTICLE XI — GENERAL PROVISIONS

Section 11.1 — Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of New Mexico, including the New Mexico Uniform Directed Trust Act (NMSA § 46-14-1 et seq.) and the New Mexico Uniform Trust Code (NMSA Chapter 46A), without regard to conflict of laws principles.

Section 11.2 — Notices

All notices required or permitted under this Agreement shall be in writing and delivered to the addresses set forth in Article I by:

☐ Personal delivery
☐ Certified mail, return receipt requested
☐ Nationally recognized overnight courier
☐ Electronic mail (with confirmation of receipt) to:
- Grantor: [________________________________]
- Trustee: [________________________________]
- Trust Protector: [________________________________]

Section 11.3 — Severability

If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

Section 11.4 — Entire Agreement

This Agreement, together with the Trust instrument, constitutes the entire agreement among the parties with respect to the Trust Protector's appointment and authority. In the event of a conflict between this Agreement and the Trust instrument, the Trust instrument shall control.

Section 11.5 — Amendment

This Agreement may be amended only by a written instrument signed by all parties hereto, or by the Grantor alone if the Trust is revocable.

Section 11.6 — Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

ARTICLE XII — SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Trust Protector Agreement as of the date first written above.

Grantor/Settlor

Signature: [________________________________]
Printed Name: [________________________________]
Date: [__/__/____]

Trustee

Signature: [________________________________]
Printed Name: [________________________________]
Title (if corporate trustee): [________________________________]
Date: [__/__/____]

Trust Protector

Signature: [________________________________]
Printed Name: [________________________________]
Date: [__/__/____]

ACKNOWLEDGMENT

STATE OF NEW MEXICO
COUNTY OF [________________________________]

On [__/__/____], before me, the undersigned notary public, personally appeared [________________________________], [________________________________], and [________________________________], known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to this instrument, and acknowledged that they executed the same in their authorized capacities and that by their signatures on the instrument, the persons, or the entity upon behalf of which the persons acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public, State of New Mexico: [________________________________]
My Commission Expires: [__/__/____]

[NOTARIAL SEAL]

Sources and References

• New Mexico Uniform Directed Trust Act: NMSA § 46-14-1 et seq.
• New Mexico Uniform Trust Code: NMSA Chapter 46A
• Justia — New Mexico Statutes Chapter 46, Article 14 (Uniform Directed Trust): https://law.justia.com/codes/new-mexico/chapter-46/article-14/
• Justia — New Mexico Statutes Chapter 46A (Uniform Trust Code): https://law.justia.com/codes/new-mexico/chapter-46a/
• New Mexico Legislature — HB0342 (Uniform Directed Trust Act): https://www.nmlegis.gov/Sessions/23%20Regular/bills/house/HB0342.html