Directed Trust FAQ’s

An estimated $30 trillion in assets is projected to transfer from the baby boom generation to future generations and charitable organizations. Wealthy clients are utilizing trusts in their estate planning to control asset distribution to beneficiaries. Advisors risk losing their key clients to large financial institutions if they do not have the capability to serve as corporate trustees.

Most trust companies and bank trust departments provide comprehensive trust services, which include investment management, trust administration, custody, operations, accounting, and tax reporting. Chartered in Tennessee, a ‘directed trust’ state, Counsel Trust has segregated these functions to offer specific trust administration and accounting services as directed by the trust grantor.

Counsel can collaborate with any major asset custodian, including banks and primary broker-dealer firms. An electronic link is established to enable Counsel to deliver complete trust accounting and administrative services.

In a Tennessee situs trust, the trust grantor, another individual, or any asset advisory firm designated by the trust grantor can manage the trust assets on a discretionary basis. Counsel Trust, as trustee, fulfills administrative duties and conducts due diligence reviews of the investment manager but does not possess the authority to dismiss or reappoint the investment advisor designated by the trust grantor. This characteristic distinguishes Tennessee as a directed trust state, compared to delegated trust states (most others) where the trustee can dismiss and retain external investment managers.

Advisors’ high-net-worth clients are establishing estate plans that incorporate trusts. With directed trust capabilities, advisors can continue managing the assets within a trust without disrupting asset custody or tax reporting. This prevents the risk of losing clients to bank trust departments. Additionally, in a directed trust state like Tennessee, advisors are safeguarded from being dismissed as the trust investment advisor by the trustee, who might have a conflict of interest.

The advisor often becomes the ‘quarterback’ of the client/trust relationship, serving as the liaison between the client and Counsel Trust. The advisor assumes fiduciary responsibility for investment management, while Counsel Trust assumes all administrative fiduciary liability, fulfilling its administrative, accounting, and regulatory compliance duties as trustee.

A private label trust company allows an advisory, accounting, or law firm to market trust services under its own unique branding.

Following an initial due diligence screening and formal acceptance by Counsel Trust, the new entity is established. You determine the name, branding, and marketing direction of the new firm, typically complementing your advisory firm. A data link with your firm’s preferred custodian is established through SEI, Counsel’s trust company back-office operations partner. Counsel Trust Company serves as the underlying legal fiduciary, assuming all regulatory functions, responsibilities, and liabilities. The advisor manages trust assets and maintains control over client relationships.