It has only been a couple of years since California joined the majority of states that have adopted the Uniform Directed Trust Act – a model that states can incorporate into their laws. The California Uniform Directed Trust Act (CUDTA) allows those who set up trusts with significant, complex assets to appoint a trust director in addition to a trustee.
This is beneficial for trusts with assets that require regular oversight management (like real estate and other investments or a family business). The grantor (creator) of the trust can name a trust director to manage these assets as well as distributions. This is often a professional who specializes in the type of assets included in the trust, like an investment advisor or a real estate investment professional.
In establishing a trust, the grantor should provide clear guidance regarding their goals for its implementation. Is it meant to preserve and grow generational wealth, provide income for a surviving spouse and other family members or to disburse donations to deserving non-profit organizations?
The role of the trustee when there’s a trust director
When there’s a trust director, the trustee or successor trustee (one who takes over from the original trustee, often upon their death) can focus on other things — like administrative and tax responsibilities, managing all or part of a family business and communications with the beneficiaries as well as carrying out the trust director’s instructions.
Both the trust director and the trustee have fiduciary responsibilities to the trust and the beneficiaries of that trust. Appointing a trust director can still provide valuable added oversight of the trust assets for the beneficiaries that wouldn’t be there if a trustee was solely in charge of the trust.
The CUDTA itself details the “duties and responsibilities of the trust director and … directed trustee, including specifying what powers may be given to a trust director and the information required to be exchanged by the trust director and the directed trustee.”
Not every Californian with significant assets in a trust needs a trust director. However, it’s important to know that the option of a directed trust is available and what advantages it can provide to those who want to preserve, grow and distribute their wealth intelligently long after they’re gone. Having sound estate planning guidance can help individuals determine whether this opportunity is right for them.