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

Currently, Minnesota does not have specific statutory authority for trust protectors.
Alaska, Arizona, Delaware, Hawaii, Idaho, Nevada, New Hampshire, South Dakota and
Wyoming all have specific statutes which authorize the use of trust protectors.
Directed Trusts
Directed trusts may be utilized as an option, or in addition, to the use of a trust
protector. A directed trust is one where the grantor, in the trust document, gives one or
more of the trustee’s responsibilities to a third party/trust adviser. This trust adviser has
the authority to direct the trustee with regard to the specific responsibility under the trust
adviser’s control, and generally the trustee has no discretion over that particular area of
administration. Certain jurisdictions allow for the appointment of trust advisers who
have the ability to direct trustees in certain situations. These jurisdictions currently
include Alaska, Arizona, Colorado, Delaware, Florida, Hawaii, Maine, Nebraska,
Nevada, New Hampshire, North Carolina, Ohio, South Dakota, Tennessee, Texas,
Virginia, Washington and Wyoming. Two areas where trust advisers are commonly
utilized to direct the trustee are in connection with investments and discretionary
distributions. The trust document may appoint individuals or establish committees to
advise the trustee with regard to these decisions. While family members may be named
as investment advisers or serve on investment committees, care must be taken with
regard to naming such individuals as distribution advisers or as members of distribution
committees. It is generally advisable to avoid naming persons who are related or
subordinated to a trust beneficiary.
The directed trust arrangement is different from that of a delegated trust, which allows
the trustee to contract with a third party to perform certain fiduciary acts on behalf of the
trust. In the delegated trust situation, the third party acts as an agent of the trustee,
subject to the terms of the contractual relationship. In the directed trust situation, the
third party may act as a co-fiduciary with the trustee.
Certain Instances Where Delegation or a Directed Trust May Make Sense
--Real estate, including rental properties, operating farms or timber interests where
specific management expertise may be required;
--Closely held business interests, where the trustee does not have specific expertise in
running the business or determining whether, when and how to sell the business;
--Oil, gas and mineral interests where on-going monitoring and management is
essential;
--Art, antiques, and other collectibles, particularly where the safeguarding and
disposition of the property may be at issue;
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