Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, January 29, 2021

Shh! This is a Silent Trust — Let’s Keep it Quiet

TrustTypically, it is encouraged to keep your family in the loop in terms of estate planning. However, if you are using a silent trust, it is best to keep quiet. 

"A silent trust limits the amount of information shared with beneficiaries or, in some cases, keeps the existence of the trust secret."

The duties of the trustee will vary from state to state as they are governed by state law. Most states require trusts to relay at least some information to beneficiaries who are not minorities. These states require the beneficiaries to be reasonably informed about the existence of a trust and its terms.

Most states also place limits on the information that can be provided to beneficiaries. "Some states, for example, allow the trust agreement to waive the trustee’s duty to inform the beneficiaries. Others allow the trust’s settlor (the person establishing the trust) to limit the trustee’s duty by executing a separate waiver document."

Some of the benefits of a silent trust are below: 

  • Maintaining confidentiality over the settlor’s financial affairs and estate planning arrangements,
  • Avoiding beneficiary scrutiny of the trustee’s investment and management of trust assets,
  • Preventing the disclosure of information about the trustee’s management of family business interests, and
  • Potentially reducing disincentives for beneficiaries to behave in a financially responsible manner, pursue higher education and gainful employment, and lead a productive life.

There are also drawbacks with silent trusts given the fact that beneficiaries are not as informed as they are in normal trusts. They may also do not have the same encouraging effect on behavior as normal trusts. 

If you are a secretive person, or if you do not want your family to be in the loop until after you are gone, a silent trust may be right for you. 

See Joseph R. Marion, III & David T. Riedel, Shh! This is a Silent Trust — Let’s Keep it Quiet, Adler Pollock & Sheehan P.C., January 25, 2021. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2021/01/shh-this-is-a-silent-trust-lets-keep-it-quiet.html

Estate Administration, Estate Planning - Generally, Trusts | Permalink

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