Wednesday, January 23, 2013
As I have previously discussed, some taxpayers who took advantage of the high unified credit this past year are now regretting their decision. Some of these donors are worried that they made a mistake gifting a great amount of wealth to their children. According to the Wall Street Journal, "[w]ealth transfer to younger generations is the biggest concern among clients of U.S. Trust, Bank of America's private wealth management unit." One solution for parents is the use of a "quiet" trust. This type of trust will essentially keep the person who is set to inherit the vast sum of money in the dark about their inheritance. For example, some of these trusts are set to tell the beneficiaries of the trust's existence at a certain age. These trusts are only legal in about 13 states, but 19 other states have rules that imply that those types of trusts are permitted. During the recent rush to make gifts, the demand for quiettrusts increased.
To some degree, these trusts are considered controversial because they interfere with a trustee's duty to report to the beneficiary of the trust. In quiet trusts, the donor specifies who the trustee will report to on all matters involving the trust. This type of trust is also controversial because many feel that it is wrong to hide gifts from the person that is receiving the gifts. Some argue that if a parent wants to keep secrets from their children, it might be a sign that there are other problems with the family that should be addressed. Even if a person decides to use a quiet trust, they probably should not keep his or her children in the dark for too long. A person should pick a reasonable age to let the beneficiary know.
See Kelly Greene & Arden Dale, Can You Trust Your Kid With $5.25 Million?, Forbes, Jan. 18, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.