What Is a Directed Trust?

A directed trust is a type of trust where certain investment, business, and distribution powers are bifurcated from the administrative trustee powers and assigned to Direction Advisors who hold the power and responsibility to carry out those functions. Unlike a traditional delegated trust relationship, where a single trustee manages all administrative, investment, business and distribution roles, a directed trust allows a settlor (trust creator) to separate responsibilities among multiple fiduciaries. Read more about what to consider when creating a trust.

What Is an Example of Directed Trust?

For example, one professional might act as the distribution, investment or business advisor or trustee, making decisions about how and when beneficiaries receive funds, while an administrative trustee handles administrative tasks like recordkeeping and tax filings. An investment advisor or trustee may have authority over asset allocation, portfolio management, and investment decisions. Likewise, a distribution or business advisor or trustee may have separate authority over distribution or business decisions.

This structure gives families and business owners flexibility, control, and oversight, while still benefiting from the protections of a legally recognized trust.

How Does a Directed Trust Work?

Directed trusts must operate under the terms of the trust agreement which includes:

• Roles and responsibilities: Who makes investment decisions or business decisions, who approves distributions, and who handles administration.

• Decision-making process: How conflicts are resolved among advisors, trustees, and trust protectors.

• Fiduciary duties: Each party has a legal obligation to act in the best interests of beneficiaries.

By separating duties, directed trusts can reduce the risk of a single fiduciary having too much control and allow families to use trusted advisors for specific decisions. This bifurcation of duties also helps to protect assets while preserving flexibility for future generations.

Directed Trust vs. Traditional Delegated Trust

Directed trusts have many differences from traditional delegated trusts, see the chart below for noteworthy similarities and differences.

Why Do Families and Family Offices Use Directed Trusts?

Families or family offices may choose to use a directed trust if they are Ultra-High-Net-Worth and looking for oversight of large and complex portfolios. When there are also business interests involved it is oftentimes helpful to have an investment advisor manage the trust’s business holdings and the administrative trustee to handle the administration. Directed trusts can also help to balance family input and professional management when planning for multi-generational wealth. Directed trusts can be a part of a larger tax and asset protection strategy when paired with other trust types like Dynasty Trusts or GRATs. Learn more about how trusts are taxed here.

Are There Any Risks to a Directed Trust?

While directed trusts offer flexibility, there are some considerations to be aware of. These types of trusts have a lot of complexity. Multiple fiduciaries means coordination is critical, and agreements between all parties must be precise. Directed trusts can also be more costly as you’re having to pay several professionals which will increase administrative expenses.

Frequently Asked Questions

Q: Can a directed trust be revocable or irrevocable?

A: Directed trusts are typically irrevocable, as this structure maximizes asset protection and tax planning benefits. Revocable trusts are less common because they often retain single-trustee control; however, even revocable trusts can include directed trust provisions which apply after the grantor’s death or incapacity.

Q: Who can serve as an investment advisor/trustee or distribution advisor/trustee?

A: Investment, business and distribution advisors or trustees usually professionals such as wealth managers, family office executives, or trusted advisors, but they can also include the grantor and family members if permitted by the trust agreement and the trust’s governing law.

Q: How does a directed trust benefit estate planning?

A: By separating investment, business and distribution powers, a directed trust allows families to maintain oversight, incorporate professional expertise, and implement long-term wealth strategies while minimizing administrative risk.

Q: Are directed trusts common for charitable planning?

A: Yes, directed trusts can be structured to make charitable distributions or manage donor-advised fund contributions as part of a broader estate or philanthropic strategy.

Directed trusts provide ultra-high-net-worth families, business owners, and family offices with flexibility, control, and professional management. They are particularly valuable for multi-generational wealth planning, complex investments, and structured distributions. Working with experienced wealth advisors, attorneys, and fiduciaries is essential to ensure the trust operates as intended and aligns with long-term family and financial goals. Book a consultation with an advisor today.

Wealthspire Advisors LLC and certain of its affiliates are separately registered investment advisers. © 2025 Wealthspire 

This material should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The information provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use.