Establishing a trust is an effective way to avoid California probate. However, trusts are not a one-size-fits-all solution to every estate planning dilemma. While a revocable living trust can provide a conditioned transfer of assets outside the public eye, the trust’s beneficiaries are almost always aware of both the existence of the trust and its general terms.
A secret trust, in contrast, can be formed alongside a will. It can disguise, to some degree, the true nature of a transfer as well as its intended recipient. These trusts can help Californians spare their estate scrutiny, but they do not always represent the best way to protect either the trustor’s identity or their intent.
The Law Firm of Kavesh, Minor & Otis, Inc. can help you consider the risks and rewards of forming a secret trust before making a big decision.
The Secret Trust
In estate planning, a trust is a legal entity that can receive, hold, and manage assets. After a trust is formed, its founder—the trustor—may transfer assets to the trust’s control. Whether the trustor is entitled to use the trust’s assets is dependent on the type of trust that has been formed.
However, a secret trust is a type of trust that allows you to keep secret the identity of a beneficiary of an asset. For example, you might leave your son $10,000 in your will. However, you’ve communicated to him that after your death, you want that money given to an environmental protection charity and a political organization. Maybe you want this provision kept secret from your family and other beneficiaries because they did not share your political views or they did not approve of your involvement in environmental protection programs. By bequeathing your son $10,000, it appears that you intend for him to have this money; however, you created a secret trust, and your son holds the money as a trustee for these organizations.
Deciding Whether a Secret Trust Is Right for You
A secret trust can help Californians preserve their privacy. Forming a secret trust may be ideal for high-income professionals with significant assets or for other trustors who anticipate disagreements among their heirs. In either case, a secret trust can protect the trustor’s privacy, as well as the privacy of their family.
However, secret trusts have a significant drawback. Since beneficiaries may not be aware of the trust or its terms, they cannot easily challenge the successor trustee’s decisions, even if such decisions are irresponsible, inappropriate, or outright illegal.
The Law Firm of Kavesh, Minor & Otis, Inc. can help you assess your options and decide if a secret trust is right for you.