SILENT TRUSTS PROVIDE DISCREET ASSET MANAGEMENT OPTIONS
Wealthy people in California may want to ensure that they can pass on significant assets to their children or other loved ones. However, many people may not want to disclose their plans early on, especially if they have many years left to live and want to benefit from tax as well as estate planning. In addition, their children may be quite young, and parents may want to encourage them to work hard and succeed without planning to rely on family money. However, when people create trusts, the trustees managing the assets have a responsibility to report on their administration to trust beneficiaries.
One option that some people take to resolve this issue is the creation of a silent trust. With a silent trust, the creator explicitly waives or limits the trustee's responsibility to inform the beneficiaries of the trust's existence or other administrative information. An increasing number of people are opting to create silent trusts, both to ensure that their family members will be taken care of and to receive longer-term tax benefits. In addition to encouraging people to make their own way in life, these trusts can help to avoid crimes of opportunity meant to exploit people whose wealth is well-known.
In the past, incentive trusts were a common option; beneficiaries would be required to engage in certain behaviors before receiving disbursements. However, these have often failed to achieve their desired goals and can be inflexible in changing circumstances. With a silent trust, the beneficiary would learn about the funds only upon reaching a specified age.
People who are thinking about how to provide for their loved ones may wish to consider silent trusts, among other instruments that could help them achieve their goals. A trust administration attorney might help people to draft these documents in a way that protects their assets for the future.
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