In today’s world, it is more important than ever to have trust that you can rely on for your financial future. Whether setting up a trust for your children’s education or making a major life change, an advisor can help you achieve your goals. By forming an advisor-directed trust, you can benefit from the expertise of a professional financial planner without sacrificing the personal touch.
Finding A Good Fit
It is essential for the advisor and the prospective trustee of an advisor Friendly Trust to work well together. However, finding the right fit is not always easy. You need to be careful not to choose a pushy trustee. In addition, you need to make sure the new trustee and the client get along well. When interviewing prospective trustees, ask them a series of questions about the type of trust and the role of the advisor. They should also provide you with a list of required documentation and other information. It is essential to make sure the trustee answers these questions honestly and with a positive attitude.
An advisor’s relationship with their clients is unique. They may be more accessible to clients and better understand the dynamics of the family. They can also charge a small fee, which is often less than other types of trustee fees. However, you should ensure that the trustee you choose has the necessary experience and the proper insurance and bond.
Avoidance of Fees
You can’t avoid paying fees when you work with an advisor-directed trust. The costs range from three to fifteen thousand dollars annually, and the fees are proportional to the amount of money invested. In addition, it’s not uncommon for fees to ratchet up over time. Therefore, you should look for a fee of less than one percent of your assets.
Direct trusts are complicated structures. Typically for individuals with over $10 million in assets. First, you should consider whether your state allows them. Some states, like Delaware, Nevada, and South Dakota, allow them. Make sure the state’s laws permit the type of trust you want.
By allowing you to place your family’s assets in a trust managed by an advisor. You’ll retain beneficial interest in your assets and retain control over trust information. They also give you flexibility when you want to change an existing trust.
Flexibility in Asset Management
A Directed Trust is a new type of asset management vehicle. It is offered in a few states and is designed to offer maximum flexibility and control over assets and investment management. The concept of a directed trust unbundles the traditional role of the trust account trustee from the management of investment portfolios. Traditionally, these roles have been provided by large institutions.
Directed trusts can be set up using a closely held company or a specialized asset. The settlor can designate an individual, group of individuals, or advisors to manage the asset. This allows the settlor to receive tax benefits without giving up control.
The flexibility of an Advisor Directed Trust allows the creator of the trust to use their skills to maximize its assets. For example, an Advisor Directed Trust may use two or more advisors to oversee investment and distribution. While one advisor will act as the administrative trustee, another will oversee investment management.
Investment Management Responsibilities
A directed trust allows clients to separate investment management responsibilities from the trustee. The term is a legal term that originated with the Uniform Prudent Investor Act of 1994. Originally, directed trusts were used by families to consolidate control over business entities. The family members often had more knowledge of the businesses’ operations than an outside trustee. To create a directed trust, family members formed a partnership or LLC and transferred ownership units to the trust. The trust company served as the trustee, while the partnership manager maintained control over the enterprise. This concept was later extended to include conventional asset classes.
An advisor can also benefit from the directed trust, as it can enhance client relationships. For example, the advisor can name a bank as a successor trustee, and the bank is likely to act as the first successor trustee after a client’s death. In addition, directed trust companies can serve as co-trustees. However, older clients shouldn’t name themselves as the trustee of the trust. Many older clients look to their advisors for advice regarding appointing trustees.
