A Delaware directed trust separates some trust decisions among different people instead of leaving every decision to one trustee. The trust document might put investment choices with one adviser, distribution choices with another, and other oversight powers with a trust protector. The trustee can then focus on the responsibilities the document leaves with the trustee.
Delaware law calls a person an adviser when the governing instrument gives that person authority to direct, consent to, or disapprove a fiduciary's investment, distribution, or other decisions. By default, an adviser acts as a fiduciary while exercising that authority, but the governing instrument can provide that an adviser, including a protector, acts in a nonfiduciary capacity. 12 Del. C. § 3313(a)
For the broader state-law context around Delaware trusts, see our Delaware trust law guide. This article focuses on how a directed structure allocates authority and why the exact language of the trust document matters.
What is a Delaware directed trust?
A directed trust is a trust whose governing instrument assigns specified decision-making authority to someone other than the trustee. The arrangement is created by the document, not by a label. A person becomes an adviser under Delaware's directed-trust statute only when the document gives that person authority over a fiduciary's actual or proposed decisions. 12 Del. C. § 3313(a)
That can make a complex trust easier to organize. Instead of expecting one person or institution to be the investment specialist, distribution decision-maker, and administrative trustee, the document can identify which person holds each authority. It also needs to identify what remains with the trustee, because a directed trust does not automatically remove every trustee responsibility.
How the divided-fiduciary model works
The following labels describe common functions. The governing instrument determines the actual powers, limits, and capacity of each person.
Investment direction adviser
An investment adviser can be given authority over investment decisions. Delaware defines that term broadly: depending on the trust terms, it can cover retaining, buying, selling, exchanging, managing, controlling, voting, valuing, and selecting or compensating investment providers. 12 Del. C. § 3313(d)
This role can be useful when a family wants a particular investment professional or committee to make decisions about a concentrated holding, a family business interest, or a larger portfolio. The document should say whether the trustee must follow directions, may act only with consent, or retains discretion.
Distribution adviser
Delaware's statute allows an adviser to direct, consent to, or disapprove distribution decisions. In this article, a person with that authority is called a distribution adviser so the role is easy to distinguish from an investment adviser. The authority still comes from the governing instrument, not from the label alone. 12 Del. C. § 3313(a)
Separating investment and distribution decisions can let different people focus on different questions. For example, one role may evaluate investments while another applies the document's distribution standard. Whether that separation is useful depends on the trust's purpose, assets, beneficiaries, and written terms.
Trust protector
Delaware includes a trust protector within the term adviser. A governing instrument may give a protector powers that include removing or appointing trustees or advisers, modifying the instrument for tax status or efficient administration, or changing the scope of a beneficiary's power of appointment. Those are examples of powers the document may grant, not automatic powers every protector receives. 12 Del. C. § 3313(f)
Trustee
The trustee carries out the responsibilities that the document leaves with the trustee, including the administrative work needed to implement valid directions. A clear allocation is especially important when a trustee is expected to work alongside several advisers. For a general overview of the duties that may remain with a trustee, read Trustee Responsibilities Explained.
Why Delaware is a leading directed-trust jurisdiction
Delaware is often considered a leading jurisdiction for directed trusts because its statute expressly addresses adviser authority, investment-direction authority, protector roles, and the consequences when a fiduciary follows an adviser's direction. 12 Del. C. § 3313
Its broader trust statute also gives substantial effect to the governing instrument, including provisions that vary fiduciary powers, duties, standards of care, indemnification, and liability. That flexibility does not permit exculpation or indemnification for a fiduciary's own wilful misconduct. 12 Del. C. § 3303(a)
The practical advantage is clarity, not a one-size-fits-all answer. A directed structure can spell out who makes which decision and how the trustee responds, but its effectiveness depends on careful drafting and a workable handoff among the people involved.
How Delaware directed trusts affect trustee liability
The liability rules depend on the kind of authority the document creates.
Required directions. When a governing instrument requires a fiduciary to follow an adviser's direction, or prevents action except at the adviser's direction, a fiduciary that follows the direction is not liable for resulting loss except for the fiduciary's own wilful misconduct. 12 Del. C. § 3313(b)
Consent or veto rights. A consent structure has a different rule. If an adviser objects or fails to consent after a request, the fiduciary's protection for the resulting act or omission does not apply in cases of the fiduciary's wilful misconduct or gross negligence. 12 Del. C. § 3313(c)
Monitoring and communication. In a required-direction structure, and unless the governing instrument says otherwise, the fiduciary has no duty to monitor the adviser, advise or consult with the adviser, or warn a beneficiary or third party that the fiduciary would have decided differently. The statute treats ordinary implementation, recording, and reporting actions as administrative rather than monitoring, absent clear and convincing evidence to the contrary. 12 Del. C. § 3313(e)
These provisions do not create blanket immunity for every person involved. The statutory safe harbor protects the fiduciary that follows a qualifying direction. The adviser's status and obligations still depend on the statute and the governing instrument.
An excluded cotrustee arrangement is related but distinct. When the document gives one cotrustee exclusive authority over a power, Delaware's separate excluded-cotrustee provision allocates duties, liability, accounting, and defense obligations for that power. 12 Del. C. § 3313A
Who should consider a Delaware directed trust?
A directed structure can be worth discussing with qualified trust counsel when a trust has complex investments, a closely held business, several beneficiaries with different needs, or a reason to separate investment and distribution decisions. It can also be useful when a family wants a particular person or committee to hold a limited oversight role without placing every administrative task on that person.
It may add more complexity than a simple trust needs. Every additional role can create questions about succession, communication, compensation, records, and conflicts. Before adopting a directed structure, the people involved should be able to describe their authority in practical terms and understand how a decision moves from direction to implementation.
Questions to settle in the trust document
- Which investment, distribution, and administrative decisions belong to each person?
- Is the trustee required to follow a direction, required to obtain consent, or free to decide independently?
- Is each adviser serving in a fiduciary or nonfiduciary capacity?
- What information should advisers, the trustee, and beneficiaries receive, and who keeps the records?
- Who can appoint a successor if an adviser, protector, or trustee can no longer serve?
These questions are drafting and administration issues, not a substitute for legal advice. A trust attorney can apply the statute and the document to the actual people, assets, and goals involved.
FAQ
What is a Delaware directed trust?
It is a trust whose governing instrument gives an adviser authority to direct, consent to, or disapprove specified fiduciary decisions. The document defines the scope of that authority. 12 Del. C. § 3313(a)
Can an investment adviser direct a Delaware trustee?
Yes, if the governing instrument grants that authority. Delaware's definition of an investment decision can include investment transactions, management and voting powers, investment-provider selection, and valuation of nonpublic investments. 12 Del. C. § 3313(d)
Who is liable in a Delaware directed trust?
The answer depends on the document's structure. A fiduciary that follows a required adviser direction has statutory protection, subject to the fiduciary's own wilful misconduct. 12 Del. C. § 3313(b) A consent structure has a different exception that also includes gross negligence. 12 Del. C. § 3313(c)
What does a Delaware trust protector do?
A protector is included within the statute's term adviser. The governing instrument may grant the protector powers such as appointing or removing fiduciaries or making specified administrative or tax-related changes, but those powers must come from the document. 12 Del. C. § 3313(f)
Is a directed trust the same as delegating investment management?
Not necessarily. 12 Del. C. § 3313 addresses authority granted by the governing instrument to an adviser, while 12 Del. C. § 3322 separately addresses a fiduciary's independent appointment of an agent and the fiduciary's related duties of care.
When to talk to an attorney
Talk with a qualified Delaware trust attorney before creating or changing a directed structure, especially if it involves a business interest, a family investment committee, discretionary distributions, an existing corporate trustee, or a potential conflict among advisers and beneficiaries. The attorney can compare the proposed allocation with the governing instrument and the law that applies to the trust.
This guide is for educational purposes only and does not constitute legal advice. Consult a qualified attorney for decisions about your trust.