A lot of parents with substantial assets worry about how those assets will be distributed and used by their children. That is one of the reasons why many choose to establish trusts. Another large concern is how the assets or the existence of a trust may affect the way a child acts or behaves financially.
For this reason, more and more people are establishing a quiet trust. Though some states require that you inform beneficiaries about their trusts, there are also many states where parents can establish quiet trusts that do not have to be reported to the beneficiaries.
A quiet trust functions the same way a normal trust does. The only difference is that the language in the trust document specifically states that the beneficiary will not be notified about the trust or its assets.
Like other trusts, the trustee will be responsible for managing and administering the trust.
It is also possible to create a trust wherein some beneficiaries are notified of the trust’s existence and others are not. By including quiet trust provisions into a discretionary trust, you will have total control over which beneficiaries are notified about the trust and when they will be notified.
Why Create a Quiet Trust?
There is actually a number of reasons to keep trust information away from the beneficiaries.
One of the main reasons is that many people do not believe their children are financially responsible and are worried that knowing they have a trust will actually make them even less responsible.
In fact, only one-third of wealthy parents have fully disclosed their wealth to their children.
That is because they want to make sure their children learn financial responsibility. If a child or teenager knows that there is a large trust in his name, it may cause him to develop the wrong types of character traits.
Safety is an Important Consideration
Another reason is concern for privacy and safety. If a beneficiary has a large trust in his name and others find out about it, he may become a target for financial exploitation and fraud.
By keeping the trust quiet, you will reduce the risk that others will try to take advantage of your child beneficiary.
This can also reduce the risk of your beneficiary becoming involved in frivolous lawsuits or identity theft. You can structure the trust so that your children are notified once they have reached an age where they can better protect the assets from others.
Some people also choose to create quiet trusts if they are giving non-voting interests in the family business to the beneficiary. If the trust wasn’t quiet, the beneficiary may start requesting input and information regarding the business.
Keeping the trust quiet will keep your beneficiary’s involvement limited until you pass away.
If you are interested in arranging a trust, our firm can help. Give us a call today and we can schedule an appointment. Our attorneys love helping individuals safeguard their assets and arrange how their assets will be distributed to their loved ones.