Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, September 16, 2008

"Directed Trusts" gain in popularity

A "directed trust" is one in which the settlor grants a third party the ability to tell the trustee what to do with regard to certain activities (especially investing) the decisions about which were traditionally performed by the trustee acting alone.

According to Arden Dale, Estate Plans With Reins, Wall St. J., Sept. 13, 2008, directed trusts are gaining in popularity.

  • Approximately 30 states have statutes which allow directed trusts.
  • A common scenario for the use of a directed trust is as follows:  "An entrepreneur nearing retirement * * * might choose a directed trust to safeguard his company along with the rest of his estate, but also give family members the power to buy, sell and have voting rights on the company stock."
  • The technique is also helpful to keep specialized investments controlled by someone with long experience with the investment.
  • Although there is no minimum amount for a directed trust, many experts opine that $1 million is the minimum amount to make the technique cost-effective.
  • Professional trustees like the technique because they do not have to make decisions with regard to investments in which they lack expertise.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this article to my attention.


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