While every estate plan should be tailored to the unique needs of the person creating the plan, there are some common components found in the average plan. A trust, for example, is among the popular of all estate planning tools – but why would you want your trust to be a secret trust? The trust attorneys at Morris Hall PLLC explains when creating a secret trust is the best option.

Your Last Will and Testament

At its most basic, a Last Will and Testament is a legal document that allows the Testator (person making the Will) to make gifts of assets owned by the Testator at the time of his/her death. Because a Will must be submitted to the court for probate, the terms of a Will become available to the public. Therefore, gifts made in a Will would not t be concealed or kept secret. For a variety of reasons, the public nature of a Will doesn’t sit well with some people. The existence of a trust, however, can be kept secret.

How Does a Trust Work?

A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Trustor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust's beneficiaries.  All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Trustor and which is typically activated by a provision in the Trustor’s Will.  A living trust is a trust that takes effect as soon as all the legalities of creation are in place. Assets gifted in a trust are distributed according to the terms of the trust agreement. Although a trust agreement does not typically need to be submitted to a court, the existence of a testamentary trust itself as well as the identity of the beneficiaries of the trust, are typically mentioned or reference within a decedent’s Will so  that everyone knows how the trust assets are to be handled.

Using a Secret or Semi-Secret Trust

If you prefer to keep certain aspects or details of your estate plan secret, using a secret or semi-secret trust may be your best option. A secret trust is one in which a Testator appears to leave assets outright to someone in a Will; however, that beneficiary is really a Trustee for another beneficiary. For example, you might leave real property in your Will to your sister absolutely when, in fact, you have made it clear to your sister that the real property is intended to be used for the benefit of your children.

Another option is a semi-secret trust. In that case, the existence of the trust is mentioned in a Testator’s Will; however, the names of the trust beneficiaries and/or other terms of the trust are not outlined in the Will. Imagine, for example, that you gifted that same real property to a trust in your Will and simply stated that the property is “to be used according to my wishes.” In that case, the existence of the trust is made public in your Will; however, the beneficiaries and terms of the trust are not made public.

The creation of a secret or semi-secret trust requires an arrangement between the Testator and the Trustee of the trust. That arrangement should, ideally, be set out in a separate document to ensure that your wishes are honored and, more importantly, legally enforceable.

Why Create a Secret or Semi-Secret Trust?

Usually, a Trustor /Testator feels the need for a secret or semi-secret trust for one of two reasons. He/she either wants to keep the terms of his/her estate plan out of the public eye altogether or wants to keep beneficiaries/heirs from knowing the terms of that plan. Public figures, celebrities, and individuals with considerable wealth may simply want to avoid public scrutiny. Even if you are not in the public eye, you may not want all your heirs to know how you distributed your assets. A secret or semi-secret trust is a viable solution.

Contact a Local Trust Attorney

For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about the type of trust that is best for your estate plan, contact an experienced trust attorney at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.  Morris Hall has offices throughout Arizona and New Mexico, including Phoenix, Mesa, Albuquerque, and Santa Fe.