Directed Trusts, Trust Protectors, Private Trust Companies and Other Bells and Whistles

Directed trusts allow "special trustees" or non-trustees to make investment, management, distribution and other decisions on behalf of a trust. Such arrangements can be set up to protect parties vested with fiduciary control of a trust, such as corporate trustees and advisors, from being held liable for losses resulting from their actions. In one case, Duemler v Wilmington Trust Co, a trust's Investment Direction Adviser sued a corporate trustee for allegedly failing to provide enough information to make an informed decision. The court ruled in favor of the corporate trustee (Wilmington Trust), finding "no evidence of willful misconduct" by the bank.

Trusts established in Delaware operate as limited purpose trust companies. Steps required to establish such a company include drafting articles of association and organization to be submitted to the State Bank Commissioner for approval. Trust companies must establish a headquarters in Delaware and are subject to oversight by the State Bank Commissioner. The ability to "export" Delaware's favorable trust laws protecting trustees acting in good faith from liability is a primary reason for establishing a trust company in the state.

Author(s)

Mike Gordon
Director
Gordon, Fournaris & Mammarella, P.A.