Probate & Trust Law Section Conference Manual ... - Minnesota CLE

account, prepare and/or sign the trust tax returns, prepare and send trust
statements, make distributions and receive contributions, etc. Additionally, the
administrative trustee ensures that the trust document is followed (i.e., if the
investment managers are investing in hedge funds and the trust document
prohibits hedge fund investing).
ii. The Investment Advisor or Committee
An Investment Advisor or Committee, which is typically comprised of the
client’s family members, selects who will be responsible for the investment
management of the trust assets. The trust advisor, investment advisor/committee
and selected investment manager(s) then directs the administrative trustee as to
how the trust will be invested and generally invests pursuant to an Investment
Policy Statement. The Investment Committee/Advisor may direct the
administrative trustee as to insurance, closely-held stock, partnerships, LLCs,
real estate, art, and other illiquid assets held by the trust. Committee members
may be chosen based upon their experience and expertise with a particular asset
class.
iii. The Distribution Advisor or Committee
A Distribution Advisor or Committee is often established to determine when
discretionary trust distributions should be made. This committee is typically
comprised of both family and independent members to accommodate both tax
and non-tax sensitive distributions. Family members may serve on these
distribution committees and determine all distributions of income and principal
for "health, education, maintenance and support" (HEMS). Any additional
distributions may be tax sensitive and require an independent trustee. The
administrative trustee may also play a role on this committee as an independent
committee member for tax sensitive distribution purposes.
b. State Statute Protection: Generally advisors draft directed trusts for investment
management purposes with both situs and governing law provisions in states with
directed trust statutory protection. Examples of states that authorize directed trusts states
are: Alaska, 80 Colorado, 81 Delaware, 82 District of Columbia, 83 Florida, 84 Nevada, 85 New
Hampshire, 86 South Dakota, 87 Virginia, 88 and Wyoming. 89
Additionally, many states allow an administrative trustee to take direction from a
Distribution Committee regarding distributions such as Delaware 90 and South Dakota. 91
80 ALASKA STAT. § 13.36.375.
81 COLO. REV. STAT. § 15-1-307.
82 DEL. CODE ANN. tit. 12, § 3313.
83 D.C. CODE § 19-1308.08.
84 FLA. STAT. § 736.0703.
85 NEV. REV. STAT. §§ 163.553 – 556.
86 N.H. REV. STAT. ANN. §§ 564-B:12-1201 – 1206.
87 S.D. CODIFIED LAWS §§ 55-1B-1 – 55-1B-11.
88 VA. CODE ANN. § 64.2-770.
89 WY. STAT. ANN. §§ 4-10-710 – 4-10-718.
DEL. CODE ANN. tit. 12, § 3313.
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