November 2019
By: Dyan Metzner
Estate planners are familiar with creating trusts to prudently manage and safeguard their clients’ wealth. Clients generally understand the benefits of a trust as a tool for achieving a host of planning goals. But many clients are averse to the idea of hiring a professional, non-family member trustee to manage their wealth, even though a professional may better serve their needs. In addition, attorneys often fail to advise their clients about the risks of appointing a non-professional trustee.
Such risks include a trustee who steals from the trust, a trustee who fails to exercise independent discretion (and thus subjects the trust to estate or generation skipping transfer tax inclusion), and litigation initiated by beneficiaries who simply don’t like the family member trustee. A directed trust allows trust settlors to involve family members in the administration of a trust when appropriate, but to use professionals to ensure compliance with fiduciary duties, provide professional investment management, deal with contentious beneficiary relationships, manage complex assets, and provide independent judgment with respect to discretionary distribution decisions.
