There are Benefits and Drawbacks to Silent Trusts

07/24/2017

Beneficiaries of a trust do not necessarily have to know about the trust details or its existence.

A potential way to avoid the problem of unintended consequences of a trust is by using a silent trust, according to Financial Advisor in "I Have a Trust?"

As the name implies, a silent trust keeps beneficiaries in the dark about the existence or some of the details of the trust, until a later specified time. This could be upon reaching a certain age or graduating from college.

It is not always a good idea to tell a young person that they can expect to receive large trust distributions in the future, because it can reduce their motivation for successful accomplishments.

However, beneficiaries cannot be negatively affected by a trust if they do not know about it.

However, there is a major drawback.

Beneficiaries who do not know about a trust, cannot monitor the trustee to make sure the trustee is not disregarding his or her fiduciary duty.

The rules concerning silent trusts vary greatly from state to state. Some states do not allow them.

A wills and trusts attorney can advise you on the creation of a trust that will fit your unique circumstances.

Reference: Financial Advisor (June 22, 2017) "I Have a Trust?"