Directed Trust

By: Martin M. Shenkman, CPA, MBA, JD

Investment of trust assets has historically been handled by the trustee. In fact, investment management was considered a non-delegable duty of the trustee. The Prudent Investor Act, adopted in some form in most states, permits a trustee to delegate investment management to another qualified person. If the trust document and/or state law permit the trustee to not just delegate investment management, but to receive direction from a specfied person (often an investment adviser named in the trust agreement) the trustee will have less responsibility for the monitoring of investments and less liability then if the trustee merely delegated investment authority. In other words, the trust permits a designated investment adviser to direct the the trustee how to invest.

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