Trustees and fiduciaries in Delaware

Directed trusts and advisers

Delaware law can treat a person with authority to direct, consent to, or disapprove fiduciary decisions as an adviser and a fiduciary. The governing instrument can change that result by providing for a nonfiduciary role.

In a Delaware directed trust, an adviser's authority may include investment decisions, distributions, or other decisions. The directed fiduciary has no duty to monitor, advise, or warn beneficiaries unless the instrument provides otherwise.

Cotrustees and co-fiduciaries

Delaware law generally relieves a cotrustee who is excluded from specified authority of any need to monitor, advise, or notify beneficiaries about the other cotrustee's actions.

Under Delaware law, co-fiduciaries generally must participate in administration and try to prevent breaches. The section does not excuse liability for failing to do so.

Delegation to agents

A Delaware fiduciary may delegate duties to an agent. The fiduciary keeps responsibility for careful selection of the agent, the terms of the delegation, the payment, and oversight of the agent's work.

Where those conditions are met, the fiduciary is not liable for the agent's conduct.

Compensation and affiliate disclosure

A Delaware fiduciary seeking compensation under the statute's compensation provision must disclose certain affiliate payments. The disclosure covers all fees or commissions that an affiliate pays or receives from affiliated investments or dealings.

The disclosure goes to each principal and to the current account statement recipients.

Letters of wishes and asset substitution

A letter of wishes does not bind a Delaware trustee. The trustee has no duty to follow it, and following or not following it creates no inference of improper exercise or abuse of discretion.

A trustor's power to substitute property carries its own condition. Unless the governing instrument expressly provides otherwise, the fiduciary responsible for investment decisions must determine that the substituted property is of equivalent value before allowing the substitution.

Appointing successor and additional trustees

Delaware deems the power to appoint a successor trustee to include the power to appoint multiple successors. A presently exercisable power to remove and replace a trustee includes the power to appoint additional trustees.

Appointments of additional trustees that modify an existing trustee's duties take effect only 30 days after the existing trustee receives written notice detailing the changes. The existing trustee may waive the 30 days.

Banks and trust companies acting as fiduciaries

A Delaware bank or trust company that runs a common fund must value the fund's assets at least every 3 months. Interests in the fund may be acquired or redeemed only on that valuation basis and date.

Delaware law also bars a bank or trust company from using funds held as a fiduciary to purchase property held by its commercial or banking department. The prohibition does not apply to mortgages and their accompanying bonds.