While some financial planners in Maryland and across the country like the benefits of silent trusts, an executive with an investment bank points out that there are several problems with this type of estate plan. She explained that they can come to the forefront and attract attention to themselves, which can cause issues down the road.
A silent trust can be a solid tool during estate planning when minor beneficiaries are involved because they do not need to know about the details of the trust when they are young. Other reasons for keeping a potential beneficiary in the dark about a trust include financial irresponsibility. The parent or grandparent might want the recipient to finish school or obtain an advanced degree and settle into a stable job before they receive an inheritance. Whatever the reason, the financial advisor, trustee, lawyer and grantor should all discuss how estate administration will be handled as a group.
Keeping the trust a secret once the oldest beneficiary receives their money could be nearly impossible, as younger siblings will probably end up learning about the trust. Another challenge with a silent trust is that a trustee has to keep it a secret and might not be able to interact with the parties to see if they manage finances wisely or if they have a true need for money. Ongoing communication with the beneficiaries can help them know what the intentions of the grantor were when they set up the trust.
Planning for the distribution of an inheritance can sometimes be a complex legal matter, and someone looking into setting up a silent trust should consider the issues. An estate-planning attorney might be able to help clients with setting up a trust.