Dec 1, 2010 12:00 PM

Changing circumstances have led to a bifurcation of functions

By David A. Diamond & Todd A. Flubacher

Over the last decade, trust law has undergone a transformative evolution. It's becoming commonplace for trust settlors to design so-called “directed trusts” and to transfer existing trusts to new jurisdictions to become modified as directed trusts. These trusts include provisions that allow for an advisor, co-trustee or other fiduciary to direct the trustee on how to exercise a variety of ministerial and discretionary responsibilities, such as investment decisions pertaining to all or a portion of the assets, tax reporting, distributions, transfer of trust situs, amendments to the trust instrument and how and when beneficiaries receive notices and information. The trustee continues to possess the trust power and authority that the direction covers, but the trustee executes those powers at the direction of an advisor.¹ This innovation in trust law was both necessary and long overdue.

Changing circumstances have led to the evolution of trust law towards bifurcation of trustee functions between the trustee and a separate advisor. Today, settlors often select a trustee in a jurisdiction far away from their residence, such as Delaware, Nevada, Alaska or South Dakota to take advantage of their beneficial trust laws. In addition, many existing trusts are moving to those jurisdictions. Consequently, the trustee is often selected because of its ability to administer the trust effectively and efficiently in a desirable jurisdiction. The trustee may provide excellent custody and account statement services, but isn't the party that the settlor or beneficiaries would prefer to make some or all of the investment or distribution decisions.

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

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