Quiet Trusts: The Benefits of Privacy in Estate Planning

Following the leak of the “Pandora Papers,” which exposed tax secrecy on a major scale, the use of secret trusts has “come under fire.” The massive media coverage following the leak of the Papers resulted in public outrage as the Papers appeared to unveil the “secrecy in trust administration as a tactic to allow the wealthy to conceal their riches and avoid tax obligations.” 

One of these exposed methods are the use of “secret” or “quiet” trusts. State laws typically require trustees to provide certain trust information to beneficiaries of a trust. However, some may want to keep certain information about a trust—or the trust in general—secret from a beneficiary. This is common when the beneficiary is a child. This is a “quiet” or “silent” trust. 

Although there are many reasons to take advantage of the use of a quiet trust, one of the major reasons is privacy. The use of a quiet trust “can enhance these privacy benefits by limiting the number of people with knowledge of a trust or its assets.” Other reasons include incentivizing children/beneficiaries to make their own way in life and not rely on trust assets and minimizing risks like scams and other predatory practices. 

Although the “secrecy” of quiet trusts has received major criticism from the public recently, these types of trusts provide “meaningful benefits, particularly to parents who want to pass their children the family farm, small business, or their wealth.” 

See Myleah Wiedmann & Tim Billion, Quiet Trusts: The Benefits of Privacy in Estate Planning, Robins Kaplan LLP, Winter 2021. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.