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Setting up a Directed Trust

Say that you are a small business owner, with a significant amount of assets even without counting your business. Now imagine that you would like to put most or all of your assets into a trust to avoid probate and protect them for future generations. You choose a bank to manage the trust, but there's one problem.

You do not trust the bank to oversee your small business, make important decisions and delegate responsibilities. Instead, you would like your son to take on the role of trustee for the business asset in your trust.

If you found yourself in this situation, then you might be looking at setting up something called a "directed trust."

A directed trust allows you to appoint a bank or trust company as the overall administrator of your assets, while singling out another individual to serve as the trustee over a single asset within the trust. This could be a small business, property, etc.

As Arden Dale points out in the The Wall Street Journal, many banks or trust companies are more than happy to turn over the reins in an area where they do not have as much expertise.

Directed trusts, like any piece of estate planning, require a keen eye and attention to detail. For that reason, it's best to work with an estate planning attorney who is familiar with directed trusts, how they can be used and how to structure them so that the future of your asset is ensured.

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