The Uniform Directed Trust Act (the “Act”), approved July 19, 2017 by the National Conference of Commissioners on Uniform State Laws, purports to govern irrevocable directed trusts. For purposes of the Act a directed trust is a trust whose terms grant a power of direction to someone other than the trustee, such as a power over the investment, management, or distribution of trust property. That “someone” is a “trust director,” which is essentially another name for trust protector. A non-fiduciary power of appointment is not such a power of direction. General principles of equity, however, will govern whether a holder of a power of direction is actually either a true co-trustee or the holder of a non-fiduciary power of appointment. The Act makes no effort to regulate the critical threshold exercise of sorting out whether a designated trust director actually qualifies as such under the Act. The public policy that would be implemented by the Act is that a trust director is a fiduciary with an affirmative duty to act. A breach of the trust director’s fiduciary duty is a breach of trust. A beneficiary’s main recourse for misconduct by a trust director is an action against the director for breach of his fiduciary duty to the beneficiary. The directed trustee incurs secondary liability only to the extent of his own willful misconduct. It is black-letter law that neither the holder of a non-fiduciary power of appointment nor an agent-fiduciary has an affirmative duty to act. A trustee, on the other hand, does. Now, so also does a trust director. Subject to the limitations of his powers of direction and to legal title to the subject property being in someone else, under the Act the trust director essentially possesses all the rights, duties, obligations, and liabilities of a true trustee. Here is a link to the Act.
Some traps for the unwary in the Act: (1) Under the Act, the directed trustee is liable only for his own “willful misconduct,” while under the UTC (§ 808(b)), he may not honor a direction that is “manifestly contrary to the terms of the trust or the [directed] trustee knows the attempted exercise would constitute a serious breach of a fiduciary duty that the person holding the power owes to the beneficiaries of the trust.” (2) While the Act is almost all about non-trustee trust directors, buried in the Act (§ 12) is some direction doctrine applicable to co-trustees! (3) The Act does not apply to powers to hire and fire trustees and trust directors (§5(b)(2)). Presumably background principles of equity will continue to regulate those types of directions. (4) The UTC (§808 cmt) and the Act (§9 cmt) treat veto powers differently when it comes to directed-trustee liability.
Under the Act, one who is vested under the terms of a pet trust with a power to seek the trust’s enforcement would owe fiduciary duties, but to whom? The Act doesn’t say. See UDTA § 6, cmt. All it says is that the enforcer is a trust director and thus regulated by the Act. Id. Pet trusts are covered generally in §9.9.5 of Loring and Rounds: A Trustee’s Handbook [pages 1565-1567 of the 2017 Edition], which section is reproduced in its entirety below.