Directed Trusts: What Are They and Why Are They Used?

Trusts
Written By May Franco

What is a directed trust?

A directed trust is a trust structure where specific responsibilities are assigned to different parties. Instead of one trustee handling everything, duties such as investment management, distribution decisions, or administrative oversight are separated and clearly defined.

Why do directed trusts exist?

Directed trusts are often used when families, advisors, or institutions want specialization. Investment decisions may remain with a financial advisor, while trust administration is handled by a trust company that works to ensure the trust follows its governing document and applicable regulations.

Who Typically Uses Directed Trusts?

Are directed trusts only for ultra-high-net-worth families?

No. Directed trusts are used by a wide range of individuals, families, and institutions. They are commonly utilized by RIAs, financial advisors, credit unions, and wealth management firms seeking a structured fiduciary arrangement.

Why do advisors and institutions consider this structure?

A directed trust can help to ensure role clarity. Advisors continue managing investments, while administrative and fiduciary responsibilities are placed with a trust company designed to handle them.

What Qualities Matter in a Directed Trust Provider?

What should advisors look for in a directed trustee?

A strong directed trustee typically demonstrates clear administrative processes, defined fiduciary responsibilities, regulatory awareness, and experience working alongside advisors and institutions.

Why is collaboration important?

Directed trusts require coordination. A trust company must work effectively with advisors, legal counsel, and institutions to help ensure instructions are followed as written and decisions are documented appropriately.

How Does Members Trust Company Support Directed Trusts?

What role does Members Trust Company play in a directed trust?

Members Trust Company serves as a directed trustee or administrative trustee, depending on the trust structure. The firm works to ensure trust administration aligns with the trust document while allowing advisors and institutions to retain their designated roles.

How does this help advisors and RIAs?

Advisors maintain investment direction, while Members Trust Company handles trust administration, recordkeeping, and fiduciary oversight related to its assigned responsibilities. This structure helps to ensure duties remain clearly separated.

Why Do Credit Unions and Wealth Firms Work With Members Trust Company?

Can credit unions use directed trusts?

Yes. Directed trusts are frequently used by credit unions seeking to offer trust services without managing every fiduciary function internally. Members Trust Company supports this model by providing trust administration tailored to institutional partnerships.

How does this structure support scalability?

By separating responsibilities, institutions can expand trust offerings while working to ensure compliance, documentation, and fiduciary processes remain consistent.

How Are Directed Trusts Different From Traditional Trusts?

Is a directed trust less regulated?

No. Directed trusts remain subject to applicable trust laws and fiduciary standards. The difference lies in how responsibilities are allocated among parties.

Does this structure reduce accountability?

Accountability is defined, not reduced. Each party is responsible for its assigned role, which helps to ensure transparency and documented decision-making.

Is a Directed Trust the Right Fit?

Who benefits most from this approach?

Directed trusts are often suitable for individuals and institutions that value specialization, collaboration, and clarity in fiduciary roles.

What is the next step?

A conversation with a trust company that understands directed trust administration is typically the starting point.

Final Thought

Members Trust Company demonstrates the qualities often associated with effective directed trust administration. By supporting defined fiduciary roles and working alongside advisors, RIAs, credit unions, and wealth management firms, Members Trust Company offers directed trust solutions designed to align with modern estate and trust planning needs.


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Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.

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