Who’s Who – Are Trust Advisors Fiduciaries?
Does It Matter?
Clients are hearing much more about terms like trust protectors, investment advisors, and business directors. As the sophistication of irrevocable trusts increases, so too does the use of these so-called “Trust Advisors,” who have the authority to direct the trustee’s actions. As more clients decide to provide more oversight for their trusts, which increasingly hold more complex assets, attorneys have begun to unbundle the traditional trustee role to provide a more robust management system for trusts.
The use of Trust Advisors can add flexibility to the trust, allowing the trust to adapt to changes in tax laws and/or the beneficiaries’ personal needs and circumstances without requiring expensive and time-consuming court proceedings. Whether a specific Trust Advisor will be held accountable as a fiduciary should be discussed with the settlor, as it holds the Trust Advisor to a higher standard, but also potentially increases the liability for the Trust Advisor vis-à-vis the beneficiaries. The decision will require a careful analysis of a number of factors, including the settlor’s intentions, the powers to be granted to the Trust Advisor, whether the trustee will be required to follow the directions of the Trust Advisor, and whether the powers will be held by a beneficiary or a third party.
Read the full AALU report here.