There are a number of reasons it may be necessary – or at least advisable – for California residents to review and update their estate plan over the years after they first create it. One involves changes in the law. Some of these changes give Californians more options for responsibly leaving assets to loved ones and others.
Last year, the California Uniform Directed Trust Act (CUDTA) was enacted. Let’s take a look at what it means for Californians
What is a directed trust?
When a grantor sets up a directed trust, they name at least one “director” or advisor who has the authority to make decisions for the benefit of the trust and its beneficiaries. In a traditional trust, this would be the job of the trustee. However, with a directed trust, the trustee is expected to take actions based on those decisions (unless doing so would involve fraud or other wrongdoing).
Typically, directed trusts are used when a trust includes complex assets like real estate or other investments that involve careful, experienced oversight that the trustee can’t provide to ensure that they are increasing in value – or at least remaining steady. Having a directed trust also provides an added layer of oversight of the trust assets for the beneficiary(ies).
The trust’s grantor (creator) should still codify overall guidance for what they want for the trust and how and when they want the trust assets distributed. For example, maybe they intend for the trust to provide continued income for a spouse or other family member for the remainder of their lives. To do so, they want the assets to remain in relatively safe investments that will steadily increase in value without undue risk of loss.
The CUDTA details the “duties and responsibilities of the trust director and … directed trustee, including specifying what powers may be given to a trust director and the information required to be exchanged by the trust director and the directed trustee.”
A directed trust may not be a necessary part of most estate plans. However, it’s important to know that it’s now an option for those who believe it can help strengthen the financial legacy they leave for their loved ones.
