What Is a Directed Trust and What Are Its Benefits?
Directed trusts can be a useful estate planning tool, allowing you to place your family’s assets in a trust but benefit from the expertise of an advisor who knows more about the handling of certain trust functions than you may.
Posted on June 21, 2021

The benefit of a directed trust is it allows you to retain control while appointing someone to handle any special assets or conditions that the trust might oversee. In the case of a regular trust, the trustee is in charge of all aspects of the trust. With a directed trust, you can appoint someone other than the trustee to be in charge of elements like distributions or investments. This splits up the responsibilities: the trustee can focus on handling the administrative aspects of the trust while the appointed advisor directs the trustee on one part of the trust.
For example, an investment advisor could focus on the trust’s investments. If you have complicated investments, it might be a good role for a trusted financial advisor. In the case of a family business, you may want family members to have a say or want an objective non-family member to assess the family’s needs. A distribution advisor would be responsible for making distributions to the beneficiaries. This might be especially useful if you want a family member to be able to make decisions about a child with special needs. Or you might even want a committee of family members to decide how to make distributions in order to make distributions based on the needs of the beneficiaries.
Both the trustee and the advisor are considered fiduciaries, which means they must act in the beneficiary’s best interest. While the trust document sets out the responsibilities of each party, if you are creating a directed trust, it is also a good idea to write a statement of intent that explains what you want the roles of the trustee and the advisor to be.
Directed trusts are very complicated and require careful planning. If you are thinking about a directed trust, consult your attorney.
More from our blog…
5 Rights That a Trust Beneficiary Has
As a trust beneficiary, you may feel you're at the mercy of the trustee. However, depending on the type of trust, beneficiaries may have rights [...]
14 Essential Questions to Ask Aging Parents This Holiday
Thanksgiving is a time when many families come together. About 45 percent of adults surveyed said they planned to travel for the holiday, per The Vacationer. [...]
Baby Boomers: Inheritance Conversations With Your Children
Not talking to your adult children about their inheritance comes at a cost. Do what you can to manage expectations for adult children as they [...]
2024 Annual Gift and Estate Tax Exemption Adjustments
With the arrival of the new year, revisions to the annual gift tax and estate tax exclusions will be going into effect, as recently announced [...]
Recent blog posts
FREE WEBINAR
5 Things to Know About
Estate Planning
When You Turn Sixty-Five