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.
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.
A Local Attorney to Set-Up a Directed Trust
At Joseph L. Motta, elder law and estate planning firm in Avon Lake, OH, we know how to help you devise the best plan for yourself and for your heirs to avoid unwanted taxes, delays in qualifying for Medicaid and unnecessary complications when making distributions. Call 440-930-2826 to schedule a free consultation.