Pennsylvania’s New Directed Trust Statute: A Modern Approach to Trust Management
On July 15, 2024, Governor Shapiro signed into law Act No. 64 of 2024, which includes the new Directed Trust Act. The new Directed Trust Act took effect on October 14, 2024. The new directed trust statute modernizes trust management in Pennsylvania. The statute allows for the appointment of a “trust director” who can be given specific powers over the trust, such as investment management, distribution decisions, or other fiduciary responsibilities. This change offers greater flexibility and customization for grantors and beneficiaries.
The key to the statute is the allocation of responsibility and associated liability between a trustee and a trust director. Within the scope of a trust director’s responsibility, the trust director is a fiduciary, the trustee is responsible to take direction, and trustee is exonerated from liability absent “willful misconduct.”
Key Provisions of the Statute:
Appointment of Trust Director: The statute permits the grantor or other authorized person to appoint a trust director.
Delegation of Powers: The trustee can delegate specific powers to the trust director, as outlined in the trust instrument.
Fiduciary Duties: The trust director assumes fiduciary duties related to the delegated powers.
Liability: The statute clarifies the liability of both the trustee and the trust director.
Benefits of Directed Trusts: Directed trusts offer several advantages, including:
Specialized Expertise: The grantor can select a trust director with expertise in a specific area, such as investment management.
Flexibility and Control: The grantor can customize the trust’s management structure to meet their specific needs.
Improved Family Dynamics: Directed trusts can help to reduce conflicts among family members by separating responsibilities.
Asset Protection: Directed trusts can offer additional asset protection by separating control from beneficial ownership.
Implications for Pennsylvania Residents:
The new directed trust statute provides Pennsylvania residents with a valuable tool for estate planning. By allowing for the appointment of a trust director, grantors can create trusts that are. tailored to their specific needs and goals. This can ensure that their assets are managed effectively and that their beneficiaries are well-cared for.
Pennsylvania’s new directed trust statute is a significant development in trust law. It offers greater flexibility and customization for grantors and beneficiaries and it is expected to be a popular option for estate planning.
If you are considering creating a trust, or have any questions about this article, you can email Kathleen A. Maloles, Esquire, directly or connect with a Hamburg, Rubin, Mullin, Maxwell & Lupin Estate Planning Team Member, to discuss whether a directed trust is right for you.