For most families, the purpose of a trust is simple. You appoint a trustee to manage and distribute your assets after you are gone. You assume that trustee has a legal duty to act in your heirs’ best interests, to follow your instructions, and to behave carefully and responsibly. And if the trustee acts recklessly or mishandles the trust, you assume your heirs can hold that trustee accountable.
Historically, those assumptions were largely correct. Trust law imposed baseline fiduciary duties of loyalty, care, and good faith, with courts serving as a backstop when those duties were breached.
Over the last decade, however, some states have changed their trust laws to offer greater flexibility and attract trust administration business. These laws allow trust documents to modify or override duties that once applied automatically. In many cases, this flexibility is intentional and useful. But some argue it also means certain protections families assume exist may no longer be there unless they are explicitly written into the trust.
The concern is not that trustees are free to do whatever they want. It is that the legal safety net families expect may be much narrower than they realize in certain jurisdictions. Trusts still work, but they often work differently than people assume.
A Quiet Shift in Fiduciary Accountability
A growing body of commentary suggests that some trust-friendly statutes may dilute traditional fiduciary safeguards in exchange for flexibility and administrative efficiency. Proponents view this as modernization. Critics argue it places more responsibility on drafting and oversight, because default protections may no longer apply.
Delaware is frequently cited in this discussion. Delaware law permits trust instruments to expand, restrict, or eliminate many fiduciary duties that would otherwise apply by default. Trustee liability is often limited to willful misconduct, meaning intentional wrongdoing. As a result, trustees may not be liable for gross negligence, recklessness, or even bad-faith conduct that lacks a specific intent to harm.
Delaware also provides a statutory safe harbor. A trustee who acts in good-faith reliance on the trust’s terms generally cannot be held liable for resulting breaches, even if those terms are poorly drafted or ambiguous. Critics argue this can shift risk away from fiduciaries and toward beneficiaries in ways families may not anticipate.
Tennessee similarly allows trust documents to modify or eliminate many default fiduciary duties. While courts retain oversight authority and outright fraud remains actionable, critics suggest the statutory framework gives drafters wide latitude, making assumptions about baseline protections risky unless those protections are affirmatively preserved.
Silent Trusts, Directed Trusts, and Decanting
Some states, such as South Dakota, expressly permit silent trusts, allowing trustees to withhold information from beneficiaries for extended periods. Advocates argue this can promote family harmony and long-term planning. Critics caution that silence, when combined with limited fiduciary liability, can reduce practical oversight unless balanced with strong internal controls.
Directed trusts and decanting statutes are now widespread and can be powerful tools. Decanting generally allows an authorized fiduciary to move assets from an existing trust into a new trust with modified administrative terms, sometimes under different governing law. Used carefully, this can modernize outdated trusts. Used loosely, critics argue it may allow shifts in control or accountability with limited notice or recourse.
A Simple Example
Assume a trustee makes a serious investment mistake. The trustee did not intend harm, but the decision reflects poor judgment and inadequate diligence.
Under California law, trustees generally owe non-waivable duties of care and loyalty. Gross negligence or reckless conduct may expose the trustee to liability, allowing beneficiaries to seek relief.
Under Delaware law, the outcome may be very different. If the trust limits liability to willful misconduct, beneficiaries may need to prove intentional wrongdoing. Poor judgment, recklessness, or bad-faith conduct without intent to harm may not be enough. The same mistake that could lead to accountability in California may result in no remedy in Delaware.
Why Delaware Is Still Often Chosen
This raises a fair question: why would a lawyer ever choose Delaware if its laws allow fiduciary duties to be narrowed?
Delaware is not selected to weaken client intent or reduce accountability. It is chosen because it offers tools that traditional trust law often does not. These include flexibility to hold concentrated assets, permit unconventional or long-term investment strategies, separate investment decision-making from administration, support directed trusts, enable long-term or dynasty planning, and attract institutional trustees who might otherwise refuse to serve.
In many cases, a Delaware trust is intentionally drafted to preserve strong fiduciary standards. A lawyer can include provisions that hold a trustee liable for gross negligence, recklessness, or bad-faith conduct, even though Delaware law would otherwise permit broader protections. When done carefully, this can address many of the concerns critics raise.
The challenge is that in flexible jurisdictions, those safeguards live in the trust document rather than in the statute. Over time, amendments, restatements, delegated decision-making, or decanting can quietly weaken protections that were carefully included at the outset unless they are deliberately constrained and monitored.
In short, Delaware provides a larger toolbox. That flexibility can serve families very well, but it also shifts more responsibility onto drafting quality and long-term governance.
Where the Risk Really Lies
The risk is not Delaware law itself. The risk is assuming the law will enforce protections that were never explicitly required or that later changes quietly undo.
A well-drafted trust in a flexible jurisdiction can include strong fiduciary duties, reporting requirements, and meaningful accountability mechanisms. A poorly drafted or poorly maintained one may rely on assumptions that no longer hold. As trust law evolves, the difference increasingly lies not in the state chosen, but in how deliberately the structure is designed and preserved over time.
What Wealthy Families Should Take From This
The takeaway is not alarm. It is awareness.
Modern trust planning increasingly requires families to affirmatively build in protections that once existed by default. Key questions include which law governs the trust, what conduct triggers liability, how beneficiaries receive information, who has enforcement rights, and whether directors or protectors have meaningful obligations.
At EsqWealth, we view these developments as a call for more deliberate, integrated planning. We work with clients and their estate planning counsel to analyze existing trusts, stress-test fiduciary frameworks, and assess whether governing law and trust mechanics still align with long-term goals. As trust law evolves, informed oversight is often the difference between flexibility that serves a family and flexibility that quietly shifts risk.
