Protecting Privacy Through a Revocable Living Trust

For some people, privacy is important.  They don’t want others knowing about their personal affairs or their financial affairs.

In my practice, I deal with clients’ estate planning needs.  Many issues affecting estate planning involve addressing events that will happen after the client dies.  Some people cherish the idea of privacy even after their passing.

Most estate plans aren’t surprising.  For instance, if Mr. Smith has four children, his last will and testament probably says “I devise my entire estate to my four children, to be divided equally between them.”  There is little surprising in this type of Will.

In some instances, though, Mr. Smith may not leave his estate to his children equally.  Or, Mr. Smith might have a child who has an issue—such as, problems with drugs or alcohol or a disability—and he might not want the world to know about his child’s issue or how he decided to address that issue.  Even if none of his family members have an issue, Mr. Smith may not want the world to know the manner in which he left his estate.

For Mr. Smith, maintaining his privacy—even after his death—is important and it may even have a beneficial effect for his surviving family members.  For instance, it may be best that the world not know his son has a problem with drugs.

If Mr. Smith addresses his son’s drug problem in his Will, his son’s drug problem will become a public record when Mr. Smith’s last will and testament is admitted to probate.  A Will is admitted to probate with the surrogate of the county in which Mr. Smith died a resident.

Once a Will is “probated,” it becomes a public record. Any member of the public can go to the surrogate’s office and look at a copy of Mr. Smith’s Will.

In order to avoid Mr. Smith’s affairs from becoming a public record, Mr. Smith might consider using a revocable living trust as a Will-substitute. A “trust” is a fiduciary relationship, meaning that it is a relationship in which one person, called a trustee, is holding property for another person, called a beneficiary.  Whenever one person is holding property for another person, a trust exists.

In New Jersey, a trust must be in writing to be valid, so there must be a written trust agreement. The trust agreement is the legal document that states the terms by which the trustee holds the property for the beneficiary.

A “revocable” trust is a trust that you can change anytime you want. You can either modify the terms of the trust or revoke the trust in its entirety.

A revocable living trust is typically used as a Will-substitute. A Will passes a decedent’s property to others after he dies.  A revocable living trust typically does the same thing, so for this reason, such a trust is often called a Will-substitute.

The benefit of a trust over a Will is that a trust does not have to be probated. Since the trust does not have to be probated, the terms of the trust never become public.  Since the terms of the trust never become public, the public cannot see the issues the trust addresses.

Going back to Mr. Smith, through a trust, Mr. Smith could address his son’s drug issues by stating that any inheritance passing to his son must be held in trust and that the son must undergo periodic drug testing in order to receive distributions from the trust. Leaving the son the money in this manner protects the son because he doesn’t have wholesale access to the money and because the son’s issues with drugs aren’t made public.

Of course, anyone might appreciate privacy, whether a family member has an actual issue or not. Privacy is a personal desire, but the point is, a revocable living trust permits you to retain your privacy even after your death.

One response to “Protecting Privacy Through a Revocable Living Trust”

  1. Great information, and good explanation of the differences of each. It’s wonderful to have the options available that both provide so that you can truly tailor your estate planning. Thanks for posting.