Every parent wishes they could make sure their children are safe and cared for for the rest of their lives. You cannot live forever, but you can set your children up by putting together a comprehensive estate plan. Despite this knowledge, a whopping 67% of Americans don’t have any kind of estate plan.
One of the most powerful and flexible tools you have available is a directed trust. What is a directed trust? Read on for a quick introduction!
What Is a Directed Trust?
To understand what a directed trust is, you must first understand the basics, a trust. A trust is a legal mechanism used to transfer assets from one person to another, typically within families and partnerships. There are three terms to know here:
- Trustor: the person creating the trust and transferring assets
- Trustee: the person who manages a trust
- Beneficiary: the person who receives the assets from a trust
A directed trust is a helpful estate planning tool that allows you to place property into a trust, but allows for more flexibility in its management. Directed trusts are typically used for investments rather than liquid assets or real estate.
How Do They Work?
A directed trust has the same roles as a standard trust with the exception of the trustee. Directed trusts divide trustee powers between two different people:
- Directed trustee
- Designated trustee
The directed trustee does not have any decision-making powers over how the assets in the trust are managed. Instead, they perform other management-related tasks according to the terms of the trust. They do not need any type of specialized training to manage this aspect of the trust.
The designated trustee, or trust advisor, is the person in charge of making financial decisions about the trust. They determine how to invest money and when, and when to withdraw money from a particular fund. The directed trustee is typically a professional, like an attorney or financial advisor.
How Do You Set Up a Directed Trust?
It doesn’t matter if you want to set up a directed trust or a SLAT trust, you shouldn’t set one up on your own. The best place to start is with an attorney experienced in estate law. Make sure that they’re licensed in your state and have plenty of experience setting up directed trusts.
Depending on the nature of your investments, you may consider setting up the trust in a different state that is more favorable. For example, Delaware is well known for having favorable and robust trust laws. If your estate is sizable, a Delaware directed trust might be a gift to your beneficiaries.
Take Control of Your Investments Today!
What is a directed trust? It’s a flexible tool that allows you to determine how you invest your money and set your loved ones up for financial success in the future. If you’re thinking about starting one, be sure to meet with an estate planning attorney to make the most of your investments. Finding a source for solid financial advice is like finding a needle in a haystack. Thankfully, you’ve landed on one of the web’s best sources of information. Be sure to check out the rest of our blog and bookmark our page for later!
