Friday, 08 November 2019 09:50

What is a Directed Trustee? How Can They Provide Better Service to Families?

Over the past several decades, many states have worked to update trust legislation. Tennessee is a prime example thanks to its favorable tax laws and the adoption of the Prudent Investor Act, the Uniform Trust Code, and other asset protection legislation.

These legislative updates provide greater flexibility and more options to beneficiaries regarding trust accounts. One of the resulting benefits in Tennessee is the directed trust model. The directed trust model is an arrangement between a trust’s beneficiaries and their dependable advisors. Different parties are named, often by the beneficiaries, to handle specific duties and responsibilities based on that individual’s expertise. These parties make up the client’s trust advisory team, which typically includes an estate planning attorney, financial advisor, CPA, and trustee.

For example, a beneficiary may direct the trustee to engage an investment manager of their choosing to make investment decisions regarding trust assets, while the trustee continues to fulfill its duties as it pertains to the day-to-day administration of the trust. Such an arrangement may be created by the terms of the trust document itself, an agreement of all the trust’s beneficiaries, or a court order.

The resulting team of experts can then work together to provide the beneficiary the highest level of care and expertise that ensures optimal management and administration of the trust.

Below is a diagram illustrating an example of how a directed trust team arrangement might look.


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