MCLE SELF-STUDY ARTICLE A PLANNER’S GUIDE TO THE LONG-AWAITED CALIFORNIA UNIFORM DIRECTED TRUST ACT

Written by David V. Khanjyan, Esq.^* and Michael J.M. Rosen-Prinz, Esq.^*01

I. INTRODUCTION

You probably are not using directed trusts as much as you should. Directed trusts are a flexible and efficient way to divide and allocate trust powers and fiduciary duties. You may have been discouraged by California’s lack of statutory guidance, and reluctant to draft a trust governed by another state’s law, but now that California has enacted the California Uniform Directed Trust Act ("CUDTA"),⁰² you are running out of excuses. However, you still may not know how directed trusts work, or how to integrate them into your practice. Alternatively, even if you have been drafting directed trusts for years, California’s law will be new to you, as it is to all of us, and you may be curious how it differs from the rules in Delaware or other states. This article provides guidance on these issues. This article discusses the principles and practical features of directed trusts, walks through the provisions of CUDTA, reviews the use of directed trusts in California prior to CUDTA, recounts some directed trust history, and finally considers some nuances and offers a few practical tips.

II. WHAT ARE DIRECTED TRUSTS AND WHY USE THEM?