A trust is a fiduciary arrangement that allows a third party or trustee to execute fiduciary functions on behalf of the beneficiaries. Under the traditional trust model, a trust names one trustee (or co-trustees) to oversee the investment management, coordinate trust distributions and perform all administrative responsibilities of the trust. In this model, nearly all decisions surrounding the trust are made by a single trustee.
However, a single trustee may not always have the knowledge, expertise, time or resources to fully administer a trust and handle the workload, especially when the investment portfolio of the trust requires more specialized oversight.
In a directed trust, by contrast, the terms of the trust may separate certain responsibilities traditionally held by a single trustee, depending on the applicable state law. One individual may be named to oversee investments, another to direct beneficiary distributions, while a third party may be responsible for the trust administration. Directed trusts have gained popularity over the past decade, largely driven by the desire to allow for better overall oversight and management of the trust, especially where there may be more complex assets which require specialized knowledge to properly administer.
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