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How a Delegated Trust Works

A delegated trust is a trust where one party, known as the trustee, appoints an investment advisor to manage the investment of their trust assets. Here’s an overview of how delegated trusts work and the pros and cons associated with them.

When you work with an adviser-friendly trust company, you choose who your financial advisor is and what decisions they are able to make for you, and this advisor chooses a custodian. You also get to choose which state your trust is in.

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This enables you to better manage your finances.

However, there are some downsides associated with delegated trusts. When you delegate investment decisions to an investment advisor, there is fiduciary investment risk involved. This means that if a problem occurs, both you and your investment advisor are equally liable, and the prices are higher to compensate for that. Your trustee fees will typically be about 10-15% higher.

Whether you’re drafting a trust document that’s standalone or a document that’s part of your will, it’s important to know what your options are. With a delegated trust, your attorney can help you include the features that you want in your trust to ensure that all of your preferences are met.


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