Directed Trustee

In both Wyoming and Nevada, a trust may “unbundle” trustee services and allow each function — investing, distributing, and administering — to be performed by a different individual or entity. This unbundled structure is known as a directed trust. A directed trust may provide for a Trust Advisor or Investment Committee to manage trust assets and investments, a Distribution Advisor or Committee to review and authorize distributions from the trust, and an Administrative Trustee to provide administrative and compliance services in the chosen jurisdiction. The Administrative Trustee may only make investments or distributions at the direction of the relevant advisor or committee.

The directed trust model works well for families that desire a corporate trustee for administrative and situs purposes but want to engage family members and existing advisory relationships in investment or distribution activities. It is also effective for families that own complex assets, such as operating businesses, real estate, or concentrated equity positions.

Benefits

• Enhanced Control: The directed trust allows a family member or trusted advisor, subject to tax considerations, to make investment or distribution decisions. The settlor or beneficiaries may be able to participate in subsequent removal and appointment of Investment or Distribution Advisors.
• Wyoming or Nevada Situs: The directed trust allows for administration and, if requested, distribution decisions to occur within the state while retaining existing investment advisory relationships.
• Flexibility: The directed trust provides increased flexibility as to asset management, distribution decisions, and efficient decision-making.
• Cost Efficiency: The directed trust may provide substantial cost savings over traditional corporate trustee relationships.

Willow Street’s Role

Willow Street works closely with families and their advisory teams to implement and administer trust structures in a manner consistent with the strategic and financial goals of our clients.

We may serve as either Administrative or Administrative & Distributive Trustee. As Administrative Trustee, we provide record management and retention, cash management, bookkeeping / billpay, compliance, tax reporting and payment coordination, and document execution and signature authority services. As Distributive Trustee, we also hold discretion as to distributions, either individually or as part of a Distribution Committee.

Delegated and Discretionary Trustee

In contrast to a directed trusteeship, a Delegated or Discretionary Trustee retains fiduciary responsibility for all three functions: investments, distributions, and administration.

A Delegated Trustee outsources the implementation of trust investment activity to a third-party investment advisor while retaining fiduciary oversight and accountability. Willow Street may serve in this role when a directed trust is not desirable or practicable and when trust assets consist primarily of marketable securities. We typically consult with the family and beneficiaries prior to selecting the investment advisor. As an open architecture firm, our goal is to retain the family’s preferred investment advisory relationship, subject to due diligence, periodic performance review, and compliance with the terms of the delegation.

In some instances, Willow Street will serve as Discretionary Trustee, retaining fiduciary discretion over all trust activities — including investments. We typically serve in this role when trust assets consist primarily of illiquid holdings, such as private company interests, or concentrated positions in publicly traded stock. Because Willow Street is not a registered investment advisor, we do not provide investment advice or investment services in-house. When we retain investment discretion, we make decisions through the investment committees of our trust companies. We evaluate all Discretionary Trustee engagements on a case-by-case basis to define the scope of work, clarify our fiduciary obligations, and confirm that we have the authority, capability, and capacity to exercise discretion over trust assets.

To learn more about corporate trusteeship, please visit our Dispatch here or contact us for a conversation.