A New Direction for Directed Trusts
Directed trusts have become increasingly popular over the past few decades, in part, for the flexibility they offer in managing trust assets. In a directed trust, a person other than the trustee holds power to make decisions over investment, management, distribution, or some other aspect of trust administration and has the power to direct the trustee. As common as they’ve become, many states’ statutes have yet to iron out the legal uncertainties that arise when a nontrustee (or a “trust director”) holds power over the trust. In an effort to provide clarity and guidance, the Uniform Law Commission approved in 2017 the Uniform Directed Trust Act (UDTA), which has been adopted in some form by 16 states as of 2022. Professor John Morley, the reporter of the UDTA, explains some of the practical innovations and key provisions in the new law, including the scope of the powers of the trust director and the fiduciary duties of the trust director and trustee.
