Directed Trustee

The directed trustee statute has been around for almost twenty years in Delaware. However, the concept of a directed trust has been around for more than a century. In its earlier form, wealthy families used directed trusts to restrict a trustee's ability to negotiate a family business or other significant asset. In addition to the standard third-party trustee, these trusts involved Advisers (typically a family member or business associate) who (1) would direct the trustee in matters related to the family business, (2) determine the appropriate time to sell an asset or otherwise dispose of it, or (3) simply provide guidance to a trustee with regard to family matters. Today, this concept of split duties continues through the use of directed trustee statutes.

Under Delaware's directed trustee statute, there is a complete bifurcation of trustee duties, such that any actions taken by a trustee at the direction of an adviser limits the directed trustee's liability as to that action. The adviser, as a co-fiduciary, has his or her own relationship with the beneficiaries and acts in the adviser's sole discretion. This structure allows a Delaware trustee to be solely an administrative trustee and thus limit the administrative trustee's responsibilities. These administrative duties need to include certain minimum responsibilities to establish situs in Delaware. Below is the commonly accepted list of administrative duties typically performed by the directed trustee:

  1. Maintaining or arranging for custody of accounts.
  2. Maintaining storage of tangible property & evidence of intangible property,
  3. Keeping trust records.
  4. Providing office for Trustee meetings.
  5. Trust accountings & communications.
  6. Responding to inquiries.
  7. Executing documents and authorizing trust account transactions.
  8. Retaining Advisers in connection with the performance of the Administrative Trustee's duties.
  9. Preparing or reviewing trust income tax returns.