A silent trust may be used in an estate plan for several reasons. One of the most common is to prevent a child from learning about a large
inheritance. For example, if you have children or grandchildren and they will inherit a large amount of family wealth, you may be concerned about how such information will impact their development, behavior, friendships, motivation, etc.
Although your children will learn about their inheritance at some point, a silent trust allows you to have more control over the timing of when that information is disclosed to your children or other beneficiaries of the trust. Many parents would like to incorporate this type of trust in their estate plan. Unfortunately, the provisions used to create a silent trust are not authorized in all states. For an overview of related types of estate planning trusts, see Childrens Trusts.
Can I Use a Silent Trust?
A silent or quiet trust may be an estate planning method you would like to use to prevent your heirs from learning about the income or property you will be passing on to them. However, the starting point is to consult a lawyer to determine if this type of trust is an option for you based on applicable state laws. See
finding an attorney.If silent trusts are not an option in the state where you reside, a trust company may be able to help you arrange a trust that will accomplish your estate planning objectives. Because trust companies regularly assist high net worth families in estate planning, they usually have expertise in choosing the best states for certain types of trusts. For information on how to find a trust company to make a silent trust, go to
If one of your estate planning goals is to provide financial security for an adult child that cannot manage money, owes debts to creditors or could lose their inheritance due to a spouse, partner, friend or business, there are other types of trusts you may want to consider before making a silent trust. Many parents and grandparents make estate planning trusts with this issue in mind. A type of trust that may be used to address this issue is a
Keeping a Trust Secret from Beneficiary
Although a silent or quiet trust may be used to prevent a beneficiary from learning about the existence of the trust for a certain period of time, the beneficiary will eventually be given notice and other information about the trust. The time period when a beneficiary will be notified about the trust varies depending on state law and the provisions of the trust. Examples of when the beneficiary will be notified include: a. when the beneficiary attains a specified age; b. when the settlor dies; c. when the beneficiary graduates college or completes a professional or career goal; and d. after a specified number of years.If you are considering using this type of trust in your estate plan, your attorney or trust company can assist you in deciding when to have the trustee notify the beneficiaries of the trust. See also Testamentary Trusts.
What is a Silent Trust?
A silent trust, also referred to as a quiet trust, is a type of estate planning trust in which the settlor includes provisions instructing the trustee to keep information about the trust private from the beneficiaries by not providing notice and other information about the trust for a period of time specified in the trust. This type of trust may be used by a parent, grandparent or other grantor that wants to keep the trust secret or hidden from the child for a certain amount of time or until a particular event occurs. If credit issues or debts of a trust beneficiary are a concern, refer to our section on Debts Trust Beneficiary.Currently, this type of trust is only permitted in certain states in the U.S. Because the laws in many states provide trust beneficiaries the right to receive notice and certain information about a trust, making a trust you do not want your heirs to know about may involve choosing a state with the most favorable laws. See Right to Information About Trust.
States That Allow Silent Trusts
Some of the states that have statutes permitting the use of provisions to create a silent or quiet trust include Alaska, Delaware, New Hampshire, Nevada, Ohio, South Dakota, and Wyoming. This is not a complete list of states where quiet trusts may be allowed.In states that permit silent trusts, a settlor can include language in the trust document that alters the right to notice of the existence of the trust or information about the trust that a beneficiary would otherwise be entitled to receive, as long as the trust does so in a way that fulfills certain requirements. State statutes that discuss silent or quiet trust provisions include the following:Alaska: Subject to certain limitations, trusts may be modified to change the requirement a trustee would otherwise have to inform beneficiaries of certain matters. See Alaska Statutes 13.36.080.Delaware: A trust document may restrict, eliminate or vary the rights a beneficiary would otherwise have to be informed of the beneficiary's interest for a period of time, including but not limited to, a period of time related to the beneficiary's age, the life of the settlor or settlor's spouse, a term of years, a specific date or a specific event that is certain to occur. See Delaware Code Title 12, Section 3303.New Hampshire:New Hampshire Revised Statutes 564-B: 1 - 105 provides that the terms of a trust prevail over any provision in this chapter except those trustee duties that are mandatory and cannot be waived by the settlor.Nevada:Nevada Revised Statutes Section 163.004, 1.a. provides that except as otherwise provided by law, the terms of a trust instrument may expand, restrict, eliminate or otherwise vary the rights and interests of beneficiaries in any manner that is not illegal or against public policy, including, without limitation: the right to be informed of a beneficiary's interest for a period of time. Ohio:Ohio Revised Code Section 5801.04 contains provisions on quiet trusts.South Dakota:South Dakota Code Section 55-2-13 contains provisions regarding when a trustee has a duty to notify beneficiaries of the existence of a trust. The settlor, trust advisor, or trust protector may, by the terms of the governing instrument, or in writing delivered to the trustee, expand, restrict, eliminate or otherwise modify the rights of beneficiaries to information relating to a trust. This section is effective for trusts created after a date specified in the statute.Wyoming: Wyoming's Uniform Trust Code addresses quiet trusts. Pursuant to Wyoming Statutes Annotated Section 4-10-813, a trustee shall provide notice and certain information about a trust to qualified beneficiaries as detailed in the statute unless the trust instrument specifically directs, limits or waives this requirement of a trustee.State laws change frequently. The information outlined above on silent trust statutes may not be current. It is intended to provide a general overview of the types of laws that govern silent trusts.To find state statutes governing the creation, administration, modification, and termination of trusts, go to Trust Law. Consult an attorney for information on the current status of trust and estate laws in a particular state.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.This article was updated on March 3, 2017.
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