How Direction Powers Work Inside a Trust
Not every trust gives the trustee full control. Many trusts reserve certain powers for the person who created the trust, a cotrustee, or even an outside advisor. This is common with an irrevocable trust where the grantor's intent shapes how the trust operates long after it is signed.
While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.
A.R.S. § 14-10808(A)If the trust is revocable, the settlor still controls it. The trustee can follow the settlor's directions even if they conflict with what the trust document says.
Trust Protectors and Investment Decisions
Some trusts name a trust protector or an investment advisor to guide specific decisions. Trust protectors can hold broad authority, including the power to remove and replace a trustee or change how the trustee may invest trust assets. Appointing a trust protector is one way the grantor's intent can be preserved after the trust becomes irrevocable.
When investment decisions are subject to someone else's direction, the trustee does not have to second-guess every instruction. They are not responsible for reviewing those directed investments or notifying beneficiaries about actions taken under those directions.
The trustee is not subject to liability if the trustee acts pursuant to the direction, even if the actions constitute a breach of fiduciary duty, unless the trustee acts in bad faith or with reckless indifference.
A.R.S. § 14-10808(B)How This Affects Trust Administration
The limit is clear: bad faith or reckless indifference. A trustee who follows a direction in good faith is protected. But a trustee who ignores obvious red flags still faces liability.
The statute also provides that a person holding a power to direct, other than a beneficiary, is presumed to be a fiduciary. They must act in good faith with regard to the trust's purposes and the beneficiaries' interests.
For families setting up trust administration, understanding who controls which decisions matters. Splitting authority between a trustee, a trust protector, and an investment advisor can create a system of checks and balances. This structure helps protect beneficiaries while still honoring the grantor's intent for how the trust should be managed.