In this type of trust, the following responsibilities are spread out among several parties in order to limit trustee risk and ensure independent investment management:
- Investment responsibilities―An investment committee, advisor or Protector chooses outside investment advisors and managers to direct the trust’s investment. The Trustee has no fiduciary responsibility for monitoring the performance of these outside investment managers.
- Distribution responsibilities―A distribution committee, advisor or protector decides when distributions are to be made and directs the trustee usually through a “Direction Letter” as to who and how much should be distributed.
- Administrative responsibilities―The trustee handles contributions, distributions and other regular administrative functions with input from the investment and distribution professionals.
Advantages of South Dakota-based directed trusts
- Combines the benefits of an independent corporate trustee, the hospitable trust and tax environment of South Dakota, and the ability to retain preferred investment advisors no matter where they are based
- Offers a wider range of administrative and investment management options
- Allows for the establishment of a trust protector, who may change trustees and beneficiaries, direct distributions, move the trust situs, and change or terminate the trust
Descriptions of trusts are intended to be informational and are not specific recommendations. Contact a trust officer at Sterling Trustees for more detailed information on what would be best suited to your circumstances.