When establishing a trust, families are often focused on the “what”—how to protect assets, minimize taxes, and preserve wealth for future generations. But the “how” of trust administration is equally important. One of the most defining choices you’ll make is between a directed trust and a discretionary trust.
Each structure offers unique benefits, responsibilities, and degrees of control. At Sepio Trust Company, we help families navigate these options to design a trust that aligns with their values, governance preferences, and long-term goals.
The main distinction between a directed and a discretionary trust lies in who holds decision-making authority over the trust’s key functions—especially investments and distributions.
This structural difference shapes how a trust operates, who is involved, and how flexible or controlled it becomes.
A directed trust allows the settlor (the person creating the trust) to separate responsibilities among professionals or family members. For instance, an investment advisor may manage the portfolio, while a trustee handles compliance, accounting, and reporting.
Customization and Control
Directed trusts give families more control over how investments are managed. If the family already has trusted financial advisors or a family office, those professionals can continue to guide investment strategy while the trustee ensures compliance with Wyoming trust law.
Clear Division of Duties
This structure separates fiduciary roles, reducing overlap and potential conflicts. The trustee executes directions but doesn’t assume liability for investment or distribution decisions made by others.
Integration with Existing Advisors
Many families prefer continuity—keeping long-standing relationships with advisors who understand their financial philosophy. A directed trust allows this partnership to continue seamlessly.
While directed trusts provide flexibility, they require clear documentation and communication among all parties. Each role—investment director, distribution director, and trustee—must understand its boundaries and responsibilities to maintain compliance.
At Sepio Trust Company, our experience with directed structures ensures that all parties work in sync, balancing efficiency with fiduciary integrity.
In a discretionary trust, the trustee retains decision-making authority over distributions and sometimes investments, exercising judgment based on the settlor’s intent and the trust’s provisions.
Simplified Governance
The trustee is responsible for overseeing all trust functions, which streamlines administration. Beneficiaries and family members can rely on the trustee’s expertise and objectivity.
Fiduciary Protection and Professional Oversight
A discretionary trustee assumes full fiduciary duty, meaning decisions are guided by the beneficiary’s best interests and the trust’s legal framework. For families that value professional stewardship, this can reduce internal conflicts and ensure consistency.
Discretion for Evolving Circumstances
Because life and family dynamics change, discretionary trusts offer flexibility. Trustees can adapt to new needs—such as medical expenses, education costs, or changing tax rules—without requiring a formal amendment to the trust.
The tradeoff for simplicity is less direct control. Beneficiaries must rely on the trustee’s judgment, which may not always align with personal preferences. That’s why it’s essential to choose a trustee with deep experience, clear communication, and a demonstrated understanding of family values.
Sepio Trust Company approaches discretionary trusts with a focus on relationship-based administration—ensuring that each decision reflects both the settlor’s intent and the family’s evolving priorities.
Wyoming’s trust laws are among the most flexible in the nation, supporting both directed and discretionary models. The state’s statutes clearly define fiduciary roles and liability protections for directed trustees, while also safeguarding the authority and responsibility of discretionary trustees.
Families benefit from:
Whether a family values hands-on control or professional independence, Wyoming provides a stable, trusted legal framework to support either choice.
The decision between a directed and discretionary trust ultimately depends on your family’s governance philosophy, existing advisor relationships, and comfort with delegation.
For many clients, a hybrid approach—where certain elements are directed and others discretionary—offers the best balance between control and convenience.
At Sepio Trust Company, we help families weigh these options in the context of their long-term vision, values, and risk tolerance. Our role is not only to administer the trust but also to ensure it evolves alongside the family’s needs.
Choosing between directed and discretionary trust services is about more than legal structure—it’s about defining how your family’s wealth is managed, protected, and passed on.
With Sepio Trust Company, you gain a partner who understands both the technical and personal dimensions of trust design. Whether you prefer to guide the process or entrust decisions to professional fiduciaries, we help you find the right balance of control, flexibility, and confidence.
