“Bundled” Trustee

Traditional bank trust departments and corporate trustees perform distinct services, including investment management and distribution, preparation of fiduciary accountings and trust tax returns, and administration of the trust in accordance with governing instruments and applicable state trust laws. All of these services are “bundled” together and provided under a fee structure that is typically based upon a percentage of assets under management. This approach is often rigid, inflexible, and requires settlors, co-trustees, and beneficiaries to work with asset managers that are employed by or are affiliated with the trust company. Under this approach, they are unable to work with an advisor of their choosing.

“Directed” Trustee

The directed trustee model unbundles these services, bifurcates liability, and distinguishes between the investment and administrative functions of asset management and trust administration. A directed trust statute (only 4 states in the nation have such statutes) formally defines the separate duties and responsibilities of the trustee and advisor (asset manager) and allows the grantor to appoint both as fiduciaries in a trust agreement. Therefore, the advisor is charged with and held responsible for all investment duties while the directed trustee is charged with and held responsible for all trust administration duties. The combined fee charged by both entities is comparable to and often lower than traditional “bundled” trustees.

Under a directed trust model, a grantor or co-trustee can work with the advisor they choose while the trust administrative function is performed by an independent trust company. This approach allows clients to work with long-time trusted advisors in conjunction with trust administration.

South Dakota’s directed trust statute has been recognized as among the best in the nation. As a South Dakota chartered trust company, Bridgeford Trust Company can work collaboratively with clients and their long-time trusted advisors while delivering industry leading fiduciary capability.

You can learn more about Directed Trusts and review the typical modern “directed” trust structure in this piece that outlines the directed trust concept.

For more information on Directed Trusts and how they empower settlors, beneficiaries, and their advisors while revolutionizing the trust and wealth management industry, call (605) 224-9189 or contact us online.