PART II: PRIVACY MATTERS: HOW A REVOCABLE TRUST CAN PROVIDE GREATER PRIVACY

In Part I of our Privacy Matters series, we discussed what happens to your privacy when a Will is admitted to probate. Because probate is a court proceeding, the Will and certain other information concerning the estate and the decedent’s family may become part of the public court record.

For individuals who would prefer to keep their estate planning and financial affairs more private, a Revocable Trust may provide an alternative.

A Revocable Trust is created during your lifetime and can hold many of the assets that would otherwise pass through your estate at death. You, as Trustee of your Trust, continue to control those assets during your lifetime and can amend or revoke the Trust as your circumstances change.

Upon your death, the Trustee administers and distributes the assets held in the Trust in accordance with its terms. Unlike a Will, the Trust does not have to be filed with the court simply because you have died. As a result, the provisions governing the disposition of your assets can generally remain private.

This distinction was illustrated by the Gene Hackman estate discussed in Part I. His Will became part of the public record following his death and received considerable media attention, while the terms of his Revocable Trust have remained private. You do not, however, have to be a celebrity for the distinction to matter.

A Revocable Trust can provide privacy concerning not only who receives your assets, but also what you own and how and when your beneficiaries receive their inheritances. Bank and brokerage accounts, business interests and real estate owned by the Trust can be administered without the details of those assets becoming part of a probate proceeding. Similarly, provisions concerning the identities of beneficiaries, the amounts they receive and whether their inheritances are distributed outright or remain in trust do not become part of a public court record simply because they are contained in the Trust.

This can be particularly important when an estate plan involves a closely held business, significant assets or family circumstances that an individual would prefer to keep private. For example, an estate plan may provide differently for particular children, continue an inheritance in trust for a younger beneficiary or a beneficiary with special needs, or make other arrangements based upon circumstances that are personal to the family. A Revocable Trust allows those provisions to be implemented without necessarily placing the details in a publicly filed Will.

Funding the Trust Is Important

Creating a Revocable Trust, however, is only part of the process. If the objective is to avoid probate, the Trust must also be properly funded. This means transferring appropriate assets, such as real estate, bank and brokerage accounts and business interests, to the Trust during your lifetime.

Assets that remain in your individual name at death and do not otherwise pass by beneficiary designation, joint ownership or another non-probate arrangement may still have to pass through probate. For that reason, establishing a Revocable Trust should include a review of how your assets are owned and which assets should be transferred to the Trust.

Privacy Is One Consideration

A Revocable Trust is not necessary or appropriate for everyone, and privacy is only one consideration in deciding how an estate plan should be structured. For some individuals and families, however, keeping the details of their assets, beneficiaries and dispositive wishes outside of the public probate record is an important consideration.