Category: Blog

By: Dawn McGill, Vice President and Senior Trust Officer

August 11, 2025

As we approach the one-year anniversary of the enactment of the Beneficiary Well-Being Trust statute under Section 3345, Title 12 of the Delaware Trust Act of 2024, it’s a fitting moment to reflect on what we’ve learned. As corporate trustees and key participants in the planning and administration of these trusts, we have begun to see the early impact of this innovative statute on beneficiaries and fiduciaries alike.

The Purpose and Promise of Beneficiary Well-Being Trusts

At its core, the Beneficiary Well-Being Trust is designed to support not only the financial education of beneficiaries but also their mental and emotional well-being. The trust structure facilitates a broad spectrum of services and programs aimed at preparing beneficiaries for responsible wealth stewardship and fostering a deeper connection to their family’s history, values, and legacy.

Under Section 3345, “beneficiary well-being programs” are defined to include a wide range of offerings such as:

• Educational initiatives: seminars, courses, workshops, short-term university programs
• Personal support: counselors, coaches, group or one-on-one meetings
• Family-centered experiences: family retreats, meetings, reunions, and custom programs

These programs may be tailored to:

• Prepare beneficiaries—individually or as a group—for the responsibilities of inherited wealth through training in financial literacy, wealth and estate planning, intergenerational transfers, entrepreneurship, philanthropy, and understanding family business fundamentals.
• Educate beneficiaries on family history, governance, values, and dynamics, while promoting connection and mental well-being across generations.

Deliberate and Purpose-Driven Distributions

Crucially, trustees are expected to exercise discretion and deliberation when approving distributions for well-being programs. The statute does not authorize blanket coverage of personal or recreational expenses under the guise of “family events.” For example, a family vacation in and of itself would not qualify as a reimbursable family reunion. However, if a portion of that gathering is structured to include qualified programming—such as sessions on family governance, legacy education, or next-generation financial training—then that specific segment of the event may be considered an allowable expense under the trust.

This ensures that trust funds are used intentionally, in alignment with the trust’s broader objectives of preparing and empowering beneficiaries.

Flexibility Within Traditional and Directed Trust Structures

One of the most powerful aspects of the Beneficiary Well-Being Trust concept is its flexibility. The statutory framework under Section 3345 can be incorporated into both traditional irrevocable trust structures and directed trusts.

In a traditional irrevocable trust, the trustee can directly oversee and administer well-being programs as part of their fiduciary responsibilities. Alternatively, in a directed trust structure, the trust instrument may assign the responsibility for designing and implementing well-being initiatives to a distribution adviser, family governance adviser, or other designated party, while the trustee administers payments accordingly.

This flexibility allows settlors, trustees, and advisers to tailor the trust structure to meet the specific needs of the family—whether by maintaining centralized control with the trustee or enabling more collaborative governance among multiple fiduciaries.

Expanded Trustee Powers Under the Delaware Trust Act 2024

In addition to Section 3345, the 2024 amendments to the Delaware Trust Act introduced a new paragraph (32) to Section 3325 of Title 12. This provision formally authorizes all Delaware trustees to provide or engage professionals in connection with beneficiary well-being services. When trustees offer these programs directly, they may also receive additional compensation beyond their standard fiduciary fee.

This expansion of powers not only supports the administration of Beneficiary Well-Being Trusts but also strengthens Delaware’s reputation as a leading jurisdiction for progressive trust planning.

Looking Ahead

This first year has revealed the transformative potential of the Beneficiary Well-Being Trust model. By encouraging structured, purpose-driven education and support, these trusts represent a fundamental shift in how wealth is passed down—not only transferring assets but also preparing the next generation to use them wisely. Trustees, in turn, are called to play a more active and thoughtful role in balancing financial oversight with strategic engagement in beneficiary development.

In a traditional trust, a corporate trustee is responsible for the trust’s administrative, investment and distribution duties. In a directed trust, those duties are divided: the corporate trustee is typically responsible for the trust’s administration, whereas an adviser is responsible for the investments and, possibly, other traditional trustee duties such as distribution decisions.

Greenleaf Trust has significant experience with traditional and directed trusts, and is available to serve as directed trustee wherever doing so meets our clients’ needs.

Michigan recently added directed trust jurisdiction, thus enabling us to provide this service in Michigan when clients prefer. However, given Delaware’s extensive history with directed trusts, Greenleaf Trust’s directed trust services are generally best executed in collaboration with Greenleaf Trust Delaware.

WHY YOU MIGHT PREFER DELAWARE FOR DIRECTED TRUSTS
Delaware is considered by some to be a national leader because of its history as a trust-friendly jurisdiction. A Delaware directed trust may be created by someone living anywhere in the United States and could potentially afford someone with the following benefits:

Asset Protection
A Delaware trust that contains a spendthrift clause provides its beneficiaries substantial protection from creditor claims. In addition, the trustee may exercise discretion to pay the beneficiary’s ongoing expenses, even if it is aware there is an existing creditor.

Tax Advantages
Delaware provides significant tax savings for trusts created by and benefiting non-Delaware residents. With the trust not subject to state income tax or capital gains tax, this could be a significant tax-savings.

Control and Flexibility
Delaware’s directed statute allows almost all discretionary duties, traditionally the responsibility of the trustee, to be handled by an adviser, which is appointed in the trust or by the grantor, trust protector or committee. Those duties include distributions as well as investments. By appointing a distribution adviser to direct distributions, someone other than the corporate trustee decides when to make distribu-tions to beneficiaries. This may be important to the grantor since they may feel more comfortable appointing an adviser who has extensive and intimate knowledge of each beneficiary’s situation, and may rely on that knowledge when directing distributions in accordance with the terms of the trust. An investment adviser will have the power to direct the trustee for investment management and decisions, decide who manages assets of the trust and whether to hold a concentrated position in the trust. This may be particularly comforting to a grantor who has funded a trust with a closely held business, since there will be less concern with the corporate trustee deciding to sell the business in order to diversify the assets of the trust. The investment adviser can also hire agents to assist with the investment of trust assets. This includes third-party registered agents and/or financial managers. Greenleaf Trust has direct custodian feeds with the following:

The trust protector is a key fiduciary role in the administration of the trust and holds the powers specifically provided within the trust agreement or other instrument. A trust protector may have the following duties: remove or appoint trustee, advisers and other protectors; amend the administrative and technical provisions of trust; change governing law; enter into fee agreements; delegate trustee powers to trust adviser (person or entity).

If you are interested in learning more about directed trusts, please contact a member of your client centric team. We will work with you and your attorney so that your trust fulfills your financial and estate planning goals.

i. Delaware’s History

Delaware’s Court of Chancery is remarkably experienced in trust administration, having established its infrastructure in 1792. Delaware has well-developed and innovative laws with regard to trusts and their administration, as well as a highly supportive legislature, legal and banking community.

ii. Silent trusts permitted

Delaware law allows grantors to create silent trusts in that the language of the trust may vary or eliminate a beneficiary’s right to be informed of the trust for a period of time. The trust instrument must specify to which extent the trust is silent. While Delaware’s statute does not require any particular time period after which the silent period should end, examples are provided in the applicable provisions of the Delaware statute. Most practitioners believe a reasonable time period should be used. The trust will include provisions to allow the appointment of a Designated Representative that will represent and bind the beneficiaries during the silent period. Additionally, the trust can provide guidance to the trustee on how to handle disclosures if a beneficiary learns of the trust’s existence during the silent period.

iii. Ease of modification of irrevocable trusts

The most common methods available under Delaware law to modify an irrevocable trust are:
(1) nonjudicial settlement agreement, (2) decanting, (3) trust merger (4) administrative or trust protector and (5) consent petition. The circumstances and facts that surround the desire to modify the trust will determine which method is best to accomplish the desired result.
iv. avoid state income taxes on accumulated trust income and capital gains
Delaware allows trustees significant tax savings for irrevocable trusts created by and benefiting non-Delaware residents.

v. Directed trusts permitted

Delaware has a “directed trust” statute, which allows trustees to be directed on investments as well as distributions. A directed trustee on investments permits the trustee to make investment decisions as directed by a third party investment advisor named in the trust. Delaware’s directed trust law also covers distributions and other decisions and relieves a directed trustee from the duty to monitor the advisor’s conduct.

vi. Spendthrift trusts protect assets from a beneficiary’s creditors

A Delaware trust that contains a spendthrift clause provides its beneficiaries substantial protection from creditor claims. In addition, the trustee may exercise discretion to pay the trust beneficiary’s ongoing expenses, even if it is aware there is an existing judgment creditor.

vii. Asset protection trusts permitted

Delaware allows a grantor to create a self-settled or asset-protection trust, in which trust assets are protected even if the grantor receives money from the trust they created. A Delaware Asset Protection Trust is the perfect vehicle to shield assets if a grantor either owns substantial assets outright or the grantor is engaged in a high-risk profession or activity.
viii. trust distribution flexibility without court involvement
Over the years, income beneficiaries of irrevocable trusts have seen their distributions decrease primarily due to declining income yields. As a result, Delaware’s laws allow trustees to redefine income in trusts to satisfy long-term growth goals and ongoing income needs of beneficiaries.
Delaware has enacted the Total Return Unitrust Statute which gives trustees discretion to convert an income trust to a total return unitrust with proper notice to the current and remainder beneficiaries. If no one objects within 30 days of receipt of the notice, the trustee is permitted to convert the trust to a unitrust without court involvement. Under the law, the trustees invest the assets of the trust for the total return of the portfolio. Rather than distributing the income earned in the trust to the current beneficiary, the statute allows the trustee to pay a percentage of the value of the trust ranging between 3% and 5% as a unitrust payment to the current beneficiary. If desired, the total return unitrust can be converted back to an income trust with no court involvement.
Also, Delaware enacted the “power to adjust” statute that grants a trustee discretion to allocate income to principal, or principal to income, to the extent the trustee considers that allocation necessary to administer the trust. Certain factors enumerated in the statute are relevant to the trust and its beneficiaries that the trustee must consider when it decides whether and to what extent to exercise the power to adjust.

ix. Trusts can be perpetual

Delaware allows the creation of trusts funded with personal property to remain in trust in perpetuity. Real property held in trust continues to be governed by a 110-year limitation, but this limitation may be avoided simply by placing real property in a limited liability company or family limited partnership because an interest in one of these entities is personal property under Delaware law.

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