How to Establish a Direction Trust

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Case Study: How to Establish a Direction Trust

By: Wilmington Trust

Robert Haas, a resident of Solon, Ohio, has trusted his financial advisor to manage his family's assets for over 20 years. The owner of a successful furniture store chain, Mr. Haas would like to set up a trust for his son, Henry, that allows his financial advisor to manage the trust assets until Henry turns 25 years old.

Mr. Haas' advisor recommends he establish a Direction Trust in Delaware in order to take advantage of the investment direction feature allowed by the state, as well as a host of other tax advantages and flexible benefits adopted by that jurisdiction.

Haas' financial advisor contacts outside counsel to draft the agreement and a trust company in the state of Delaware to serve as trustee. Together, Mr. Haas, his advisors, and the trust company develop a trust that does three things:

Establishes the terms and beneficiary of the trust
Includes language naming Mr. Haas as the selected investment advisor, with his wife as an alternate
Includes language that allows for the separation of trust administration and investment management responsibilities, stating guidelines for the selection of each entity

Mr. Haas can, in turn, delegate the investment advisory functions to his long-term investment advisor through an agreement separate from the trust. Thus, his new irrevocable Direction Trust enables him to maintain the flexibility of having his assets managed by his hometown financial advisor.

Updated: January 1, 2013

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.

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