Will Planning: How Secret Are the Contents of a Trust?

No one likes to think about or talk about death — especially when it involves family. However, for some wealthy families, it is also difficult to talk about the extent of their wealth. Some families might even try to hide their wealth from their children through the use of a trust, even when the children are the intended beneficiaries of the trust.

The issue of the confidentiality of the assets we put into trusts is an important one. To what extent can trust beneficiaries be kept in the dark about the assets in the trusts. In the case of a child beneficiary, it is easier to keep the assets secret. However, when adulthood is reached, it largely depends on the type of trust.

If the trust is what is called a “bare trust,” then parents can try to keep the assets a secret. However, income related to the trust will be shown on the beneficiary’s tax return, so the value of the trust might ultimately become obvious to the beneficiary.

In the case of a “life interest trust,” where a beneficiary gets the income from a trust, it might become clear how much the trust contains based on the income received. Especially in the case of a determined beneficiary, the trustee of a life interest trust would not be able to keep the details of the trust a secret.

If the trust is what is known as a “discretionary trust,” the beneficiary can easily be kept in the dark by trustees. Here, the beneficiary will only receive what the trustees decide is appropriate. In this sense, discretionary trusts offer the most secrecy from beneficiaries.

There are other kinds of trusts that might be considered by Florida estate planners as well. Ultimately, parents may wish to consider which is the most appropriate path for themselves and their families — secrecy or complete disclosure. By speaking with a qualified estate planning attorney, Florida parents can decide which estate and will planning tools are best for their financial and family situation.

Source: Business Insider, “How To Tell Your Kids That Their Family Is Wealthy” Jeremy Passmore, Nov. 26, 2014