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  • Writer's pictureBroaden Law LLP

Directing the Trustee Instead of Acting the Part--Pros and Cons of having a Trust Director

Living Trusts are used primarily for incapacity and estate planning, but Trusts can contain a variety of terms and allocation of benefits and responsibilities.

A new law, the California Uniform Directed Trust Act (Probate Code §§ 16600 to 16632), became effective January 1, 2024. The CUDTA clarifies the duties and liabilities that a Trustee assumes when taking directions from a "Trust Director."

When a Trust designates certain individuals as Trust Directors, the Trust is referred to as a "Directed Trust." A Directed Trust limits the fiduciary duties that are normally owed by the Trustee to the Beneficiaries because the Trustee doesn't have as much discretion to decide regarding asset management, timing of distributions, and so forth.

Instead, the Trust Director has discretion combined with the "power of direction" over the Trustee; and so a Trust Director assumes liability that would otherwise have fallen upon the Trustee. If there are several Trust Directors, they must act by majority decision.

In a typical estate plan, a person or married couple establishes a Trust and names adult children or other close relatives to serve as successor Trustee after death. But, the average person has zero experience administering a Trust due to another person's death. And, let's face it, even non-trust lawyers don't easily grasp the meaning of a Trust.

Add the emotional burden after a loved-one passes away, and being named as a successor Trustee becomes a difficult task. Appointing a legal or financial professional as Trustee and naming close family members as Trust Directors seems like a more realistic way to allocate the responsibilities of administering a Trust that becomes irrevocable after the death of its settlor(s).

If you find yourself hesitating to make a Trust because you don't feel comfortable burdening your loved-ones with the responsibility of Trust administration, consider making a Directed Trust. Call Broaden Law LLP at (619) 567-6845 to consult with an experienced estate planning attorney about your estate plan needs.

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