Structuring Directed Trust Provisions: Granting Powers to Non-Trustees Under Uniform Directed Trust Act

Directed trusts are being utilized with increased frequency by estate planners due to the flexibility of these instruments. The recent issuance of the Uniform Directed Trust Act (UDTA) provides guidance on areas of uncertainty about the fiduciary status of non-trustee directors and will likely facilitate the drafting of directed trusts as a planning vehicle.

Directed trusts grant powers to act within the trust to persons other than the designated trustee, thus bifurcating authority for trust activities. In a directed trust, a trustee may only exercise trust power at the instruction or authorization of the trust director. Typically, directed trusts appoint trust protectors, investment advisers, or third parties to make distribution decisions and handle beneficiary notifications.

While most states have statutes authorizing directed trusts, there is significant uncertainty as to the fiduciary status of trust directors and the extent of fiduciary liability exposure for directed trustees. The passage of the UDTA, which several states have already begun to adopt, should clarify and standardize the fiduciary treatment of trust directors.

The UDTA proposes standardization of the fiduciary rules governing trust directors and directed trustees to provide uniform protection for beneficiaries. The UDTA also offers drafting guidance on issues often overlooked in structuring directed trusts. Estate counsel should have a thorough understanding of the coming changes to directed trusts to provide greater flexibility for grantors.

Listen as our experienced panel offers a solid and practical guide to structuring directed trusts in light of the issuance of the UDTA.

1. Common terms and provisions of directed trusts
2. Fiduciary issues with trust directors
   1. Identifying party responsible for loss or breach of duty
   2. Specifying what powers are outside of the trustee’s scope of responsibility
   3. Establishing duties of trust directors
3. Uniform Directed Trust Act
4. State approaches to directed trusts
5. Using directed trusts for specific trust applications
6. Drafting tools and modifying existing directed trusts

The panel will review these and other critical issues:

• What are key states’ approaches to directed trusts?
• What are the benefits and fiduciary and tax risks in using directed trusts?
• Terms and clarifications made in the UDTA to the fiduciary treatment of trust directors
• Contrasting directed trusts with a delegation of duties
• Using directed trusts for special needs trusts

Learning Objectives

After completing this course, you will be able to:

• Recognize potential advantages of directed trusts and client circumstances where directed trusts can benefit grantor and beneficiaries
• Identify the changes the UDTA makes to the fiduciary treatment of non-trustee directors
• Discern the specific applicability of directed trusts to special needs trusts
• Determine key provisions that should be part of all directed trust operating documents

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, drafting wills and trust documents, supervising other estate planners/accountants. Specific knowledge and understanding of gift tax rules and inter vivos transfer provisions; familiarity with fiduciary rules, valuation provisions and allocation rules governing trust transfers.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).