The New Uniform Directed Trust Act Paves the Way for Creative and Thoughtful Divided Trusteeship
52 Annual Heckerling Institute on Estate Planning (Tina Portando, ed., 2018, Forthcoming)
18 Pages Posted: 18 Oct 2018 Last revised: 6 Nov 2018
Date Written: September 28, 2018
This chapter summarizes the four areas of practical innovation of the Uniform Directed Trust Act (UDTA). The first is a careful allocation of fiduciary duties. The UDTA’s basic approach is to take the law of trusteeship and attach it to whichever person holds the powers of trusteeship, even if that person is not formally a trustee. Thus, under the UDTA the fiduciary responsibility for a power of direction attaches primarily to the trust director (or trust protector or trust adviser) who holds the power, with only a diminished duty to avoid “willful misconduct” applying to a directed trustee (or administrative trustee). The second innovation is a comprehensive treatment of non-fiduciary issues, such as appointment, vacancy, and limitations. Here again, the UDTA largely absorbs the law of trusteeship for a trust director. The UDTA also deals with new and distinctive subsidiary problems that do not arise in ordinary trusts, such as the sharing of information between a trustee and a trust director. The third innovation is a reconciliation of directed trusts with the traditional law of co-trusteeship. The UDTA permits a settlor to allocate fiduciary duties between co-trustees in a manner similar to the allocation between a trust director and directed trustee in a directed trust. The fourth innovation is a careful system of exclusions that preserves existing law and settlor autonomy with respect to tax planning, revocable trusts, powers of appointment, and other issues.
Prepared for the 2018 Heckerling Institute on Estate Planning at the University of Miami, this chapter is an abridgment of John D. Morley & Robert H. Sitkoff, Making Directed Trusts Work: The Uniform Directed Trust Act, 44 ACTEC L.J. 1 (2018, Forthcoming), available at: https://ssrn.com/abstract=3256987.
Keywords: trust, directed trust, trust director, directed trustee, trust protector, trust adviser, fiduciary duty, willful misconduct, Uniform Directed Trust Act, co-trustees
JEL Classification: K11, K34, K36
Suggested Citation: Suggested Citation