Pennsylvania's Directed Trust Act gives trust creators more flexibility by allowing trust responsibilities to be divided among different fiduciaries instead of placing every decision on a single trustee. The law became effective on October 14, 2024.

What Is a Directed Trust?

A directed trust is a trust that gives someone other than a serving trustee the power to direct certain aspects of trust administration. That person is called a trust director, and the trustee subject to that authority is called a directed trustee.

In practice, this means one person or institution can handle administration while another directs investments, distributions, or other trust decisions.

Why Pennsylvania's Directed Trust Act Matters

The Act reflects a modern estate planning approach: one trustee may not be the best fit for every responsibility. Directed trusts allow trust duties to be separated and assigned to two or more people.

This can be especially useful when a trust holds:

• concentrated investments
• a family business
• real estate
• assets requiring specialized oversight

When Does the Act Apply?

The Act applies to trusts governed by Pennsylvania law, regardless of when or where they were created. It applies both to existing trusts and to trusts created after the effective date.

However, it does not apply to decisions or actions that took place before October 14, 2024.

Key Terms Clients Should Know

Power of Direction

A power of direction is authority granted by the trust terms to a person who is not serving as trustee. It can cover investments, management, distributions, administrative matters, and related powers needed to carry out that authority.

Trust Director

A trust director is the person given a power of direction. Under the Act, a settlor or beneficiary may serve in that role.

Trust Protector

A trust protector is a trust director who is authorized to modify one or more terms of the trust.

Willful Misconduct

The Act defines willful misconduct as intentional conduct that is malicious, designed to defraud, or unconscionable. Negligence, gross negligence, and recklessness do not qualify.

Can a Trust Director Control Investments?

Yes. Pennsylvania's Act allows a trust instrument to appoint a trust director for investments. If the trust instrument does so and references the statute, that director may have authority over investment decisions, proxy voting, selection of investment professionals, compensation decisions, and valuation methods, unless the trust provides otherwise.

What Duties Does a Trust Director Owe?

A trust director generally has the same fiduciary duties and potential liability as a trustee in a similar position and under similar circumstances.

The trust terms may modify those duties or liabilities to the same extent they could modify a trustee's duties or liabilities in a comparable role.

What Duties Does a Directed Trustee Owe?

A directed trustee must take reasonable action to comply with a trust director's exercise or nonexercise of a power of direction and generally is not liable for doing so. The key exception is that the trustee should not comply if doing so would amount to willful misconduct.

Unless the trust provides otherwise, a directed trustee also generally has no duty to monitor the trust director or warn others that the trustee would have acted differently.

Is Information Sharing Required?

Yes. Trust directors and directed trustees are generally required to provide each other with information reasonably related to their respective powers and duties.

How Does Pennsylvania's Act Relate to the Uniform Directed Trust Act?

Pennsylvania's Directed Trust Act is derived from the Uniform Directed Trust Act approved in 2017. At the same time, Pennsylvania's version may differ in wording or substance, so the state statute should always control.

Bottom Line

For Pennsylvania families, trustees, and advisors, the Directed Trust Act provides a clearer legal framework for dividing trust responsibilities among trustees, trust directors, and trust protectors. It is especially relevant for complex trusts, family business planning, and situations where specialized decision-makers are desirable.