In an ordinary trust, the trustee holds the assets and also invests them, decides on distributions, and handles administration. In a directed trust, some of those powers are given instead to someone else, a "trust director," who can direct the trustee or act directly. Directed trusts now account for much of the business of large trust companies, letting settlors assign each decision to the person best suited to make it, but the state statutes governing them have often been incomplete and inconsistent.
In this TalksOnLaw interview, Joel Cohen speaks with Professor John Morley of Yale Law School, the reporter for the Uniform Directed Trust Act, which the Uniform Law Commission approved in 2017. Morley explains how directed trusts work, the problems the act was drafted to solve, and how it allocates fiduciary duties between trustees and trust directors.
Why Directed Trusts
Directed trusts are not new; settlors have given directions to trustees for as long as trusts have existed. Morley explains their modern appeal through examples: a parent who wants someone who knows a son with special needs or an addiction to decide when he should receive money, rather than an institutional trustee, and a settlor who wants to keep control of a family business held in trust without making the trust revocable, which for tax and other reasons may be undesirable.
Trust Directors and Powers of Direction
The act gathers the many labels used in practice, such as "trust protector" and "investment advisor," under a single term: a trust director is any person other than a trustee who holds a power over a trust. Those powers can take any form, can be held by several directors individually or as a committee, and carry by default whatever further powers are appropriate to exercise them, much like a necessary and proper clause. Morley contrasts this with statutes such as South Dakota's that bundle related powers together, so that, for example, an accountant given power to value assets might also gain power to invest them. He discusses Shelton v. Tamposi, a New Hampshire case in which an investment director and a distribution director came into conflict, and explains why the act leaves such conflicts to the terms of the trust.
Fiduciary Duties of Directors and Trustees
Under the act, a trust director has the same fiduciary duties as a trustee would in exercising the same power, and those duties can be waived only to the same extent, so the duty of loyalty cannot be waived entirely. A directed trustee, by contrast, is liable for following a director's instructions only for its own willful misconduct, a standard modeled on Delaware's law, which has attracted substantial directed-trust business. Morley explains why this compromise drew criticism from both sides, and notes that the trustee must still act reasonably in carrying out a direction even though it need not second-guess the direction itself.
Information Sharing and Drafting Risks
Morley discusses the Rollins case, which held that a directed trustee had to warn beneficiaries about directors' poor decisions, and explains that the act, like many state statutes, removes that duty, while trustees and directors must share information relevant to each other's responsibilities. The act also applies the ordinary trust-law rules on acceptance, resignation, vacancy, and removal to trust directors. Because the act does not establish a hierarchy among directors, careful drafting is essential: as Morley puts it, the act gives drafters enough rope to hang themselves.
What to Know Now
States have continued to adopt the Uniform Directed Trust Act. California's version took effect on January 1, 2024, and applies to decisions and actions taken after that date regardless of when the trust was created, and the District of Columbia enacted the act in 2025. Because states that have not adopted the uniform act often have their own directed trust statutes with different rules on directors' powers and trustees' liability, practitioners should check the governing state's statute and the terms of the trust.
