By Alyssa M. Zottola, Esq.

Pennsylvanians now have a new way to make trusts more flexible and efficient in their estate plans.  On July 15, 2024, Pennsylvania’s Governor Josh Shapiro signed into law Act 64 of 2024, bringing a version of the Uniform Law Commission’s Directed Trust Act ( “the Act”) to Pennsylvania, which went into effect on October 14, 2024.

The Act allows a Settlor (the person creating the trust) to divide the traditional roles of a trustee among several people.  This means that a  Settlor can assign tasks based on each person’s strengths and maintain  continuity with the professionals already managing their finances.   The Act creates three separate roles: 1. The Trust Director; 2. Trust Protector; and 3. Trust Director for Investments. 

Trust Director:

The term “Trust Director” refers to the category of individuals who the Settlor gives powers pertaining to the direction and administration of the trust in the trust document itself. Trust Directors offer a unique advantage to Settlors: the individual does not necessarily have to be a trustee but could be an individual with specific skills that benefit the Settlor’s estate plan. 

For example, say a Settlor owns a family business that is an asset of her trust. She has an idea of whom she would like to serve as trustee of her trust but believes that this person is not the person best suited to handle the administration of the business. The Settlor can name a trustee to handle the administration of the trust but name a Trust Director and give the Trust Director the power to direct the administration and management of the family business. 

The Act helpfully provides a list of potential powers that the Settlor can give to the Trust Director (known as a power of direction), including:

  1. To increase, decrease or otherwise modify what is distributable to one or more beneficiaries of the trust.
  2. To terminate the trust and direct how the trustee shall distribute the trust property to or in further trust for any one or more of the beneficiaries.
  3. To expand, modify, limit or terminate a power of appointment, and to grant a power of appointment to a beneficiary of the trust on terms as the trust protector specifies.
  4. The powers described in section 8104 (relating to trustee’s power to adjust) to adjust between income and principal and to convert the trust to a unitrust in accordance with section 8105 (relating to power to convert to unitrust).
  5. To convert a trust in whole or in part to a special needs trust, or provide that a special needs trust shall arise or be established at a specific time or upon the occurrence of an event with respect to some or all of the trust’s assets.
  6. To appoint or remove trustees, investment advisors and investment managers, and prescribe a plan of succession for future holders of any of these offices.
  7. To appoint or remove trust directors, specify their powers and modify the powers of a trust director.
  8. To appoint one or more successor trust protectors, and prescribe a plan of succession for future holders of that office.
  9. To renounce, release, limit or modify any power given to a trustee by the terms of the trust or by law.
  10. To resolve disagreements among trustees.
  11. To change the trust’s situs or governing law, or both.
  12. To apply to a court of competent jurisdiction to interpret any terms of the trust or pass upon an action that the trust protector, another trust director or a trustee proposes to take or not take.
  13.  Any other or different power that the settlor expressly grants to the trust protector.

Trust Protector 

A Trust Protector is a specific type of Trust Director. The Trust Protector safeguards the trust by  ensuring that the Settlor’s estate planning goals are kept intact, resolving disputes, and  responding to changing federal or state legislation impacting the trust.

 Under the Act, a trust protector is someone “authorized by the terms of the trust to modify one or more terms of the trust.” Essentially, the Trust Protector can step in to modify the terms of the trust without the need for court approval by simply notifying the other trustee(s) and qualified beneficiaries of the changes to the trust. Terms that a Trust Protector tend to be administrative in nature: if laws change, the Trust Protector can adjust the trust to keep it effective or compliant. 

Trust Director for Investments

The position of “Trust Director for Investments,” like that of Trust Protector, is a subtype of Trust Director. The Trust Director for Investment has a pretty self-explanatory role: he or she directs the Trustee over how the trust assets should be invested and managed. This allows for a Settlor to maintain a relationship with their financial advisor and employ his or her services, while still having someone else serve as trustee over the trust. Furthermore, the fiduciary responsibility  for the management of the investments stays with the financial advisor.

Conclusion

Pennsylvanians now have a critical, multifaceted tool to revolutionize their trust-based estate planning. With the new Directed Trust Act, Pennsylvanians can now delegate the various responsibilities of a trustee to the individuals best suited to such role: letting the financial advisor continue management of trust assets as the Trust Director for Investments; allowing the lawyer or other third party to step in and amend the trust terms as necessary in the role of Trust Protector; and giving another individual any of the powers listed above as the Trust Director. The Direct Trust Act enhances trust administration in Pennsylvania and allows for further specialization of trust administration.

If you are interested in creating a trust or estate plan, call us at 412-209-3200 or email azottola@PaLawFirm.com to schedule a free, no-obligation consultation.