Divide And Conquer: The Benefits Of A Directed Trust

In its simplest terms, a trust is set up by you, with instructions to the trustee on how and when to administer and distribute the assets that you place into the trust. The trustee has a lot of responsibility, and may have a lot of discretion, or very little discretion, all based on what instructions you leave to the trustee, and on what kind of trust that it is.

More is Better?

But sometimes, we have assets in trust that may be too much for one trustee to handle.

A trustee in a normal trust has a lot on his or her plate, and a great deal of responsibility. But with more complex assets, one trustee may simply not be able to or even have the know-how or experience to administer the assets in the trust, the way that you want them handled.

This is where a directed trust comes in. A directed trust allows you to set up a trust, but to have multiple trustees administer the trust, each handling a specific designated part of the trust.

Division of Duties

Ideally, and if set up properly, each trustee in a directed trust administers the part of the trust that he or she has experience handling.

So, for example, a trustee with a lot of investment experience, may handle your investments, while a trustee with a background in entertainment law issues, might handle your intellectual property left in a trust, and another trustee who may have a medical background, might handle portions of a trust left to handle a beneficiary’s medical care and needs.

It can get pretty specific–for example, one trustee may have mutual funds, another, real estate investment and another trustee, life insurance proceeds, and so on.

The Director

All of these trustees answer to a  director or trust director, who oversees all the other trustees. The director him or herself doesn’t actually administer the trust, but makes sure the trust is being administered the way you wanted it administered, by the other trustees, who are obligated to listen to the director’s instructions.

The Benefits of a Directed Trust

This sounds like a bureaucratic and complex setup—why would anybody want this? There are a number of benefits, but the most obvious one is that it allows trustees with experience in a given area or field, to handle or manage assets that the trustee has the most experience with or knowledge about.

If you have assets or property that is unique, or complex, like larger businesses, or property that most people don’t have or don’t understand, you can find a trustee that is experienced in that kind of asset.

If you have multiple people who you feel may be upset that they aren’t designated as a trustee, you now can give each of them a “job” or role as a trustee, thus avoiding infighting. And because each trustee only is responsible for a specific part of the trust, there is less room for error—and thus, less room for liability for each trustee.

Make sure your assets are handled properly in your estate plan. Call the Torrance probate will and estate attorneys at Samuel Ford Law today.