Can I Keep My Estate Private With a Living Trust?
The Average Joe With Typical Living Trust
This privacy conversation is more for the “average Joe” who doesn’t face an existing significant liability, but just simply is asking the question, “Paul, I’m considering setting up my living trust for my family to get my legal affairs straight and enable my survivors to avoid a probate mess. And oh, by the way, will me or my family get any additional privacy protections by me setting up my living trust?”
How Much Privacy Does Living Trust Provide
So I’m going to address two circumstances surrounding privacy as it relates to the typical revocable living trust. First I’ll address what privacy expectations you can have during your lifetime if you establish a RLT, and then second I’ll address what information remains private surrounding your RLT after you pass away.
This is Not Hardcore Creditor Protection
What privacy do you have with a living trust during your lifetime?
Let’s look at the typical RLT situation where perhaps a married couple (let’s call them Monica and Chandler) who now have three children want to establish their living trust and they’d like to know what bequest and asset information will remain private. So they create their RLT. Customarily, Monica and Chandler would be both the Settlors (also referred to as Grantors or Trustors) of the trust (they set up the trust), and they would also be the initial co-trustees of the trust. And let’s say the three children are the equal principal beneficiaries of the trust - designated to receive the trust assets after Monica and Chandler both pass away.
Privacy During Life and After Death
So while Monica and Chandler are alive, what information about their trust or their finances is public? Well, if Monica and Chandler own a home in their name and they form their living trust and transfer their home to their living trust, that transfer of the home to the trust must be recorded in the land records of the county where the home is located. That transfer document is a public record and it will show the world that the trust exists and that Monica and Chandler are the co-trustees of the trust.
Perhaps you might be able to make it a little harder for people to discover your trust if you both give your trust a name that does not include your personal name - so instead of the “Monica and Chandler” trust, you create the “Bengal Tiger” trust. And perhaps you make someone other than yourself as the trustee or co-trustee of your RLT, but most people want to have that control of being the trustee of their own RLT.
Privacy During the Settlors' Lifetime
Now, if you have a living trust that does not own real estate or a privately held business like and LLC, more privacy will exist with that trust during your lifetime. You can have the “Roaring Lion” trust that owns publicly traded stock and bank accounts, and since the ownership of these financial accounts are not public record, no one will need to know that the Roaring Lion Trust or these accounts exist. And, for example, if the principal beneficiary of that Roaring Lion trust is your favorite child or grandchild, and you don’t want the rest of your family to know that you’ve provided an extra inheritance to that person through the Roaring Lion trust, that may work.
Privacy When the Settlors Pass Away
So let’s continue this discussion but turn it to what kind of privacy protections exist after you pass away. First, let’s look at what happens after Monica and Chandler pass away if they do not have a living trust. Well, if they do not have a living trust, their assets will be in their name and either their Will or the state laws of intestacy will determine who their heirs are. If they have a Will, the will becomes public record as part of the public probate record. So anyone can see the terms of their Will - who is the executor and who are the heirs. If they don’t even have a Will, anyone can determine the heirs because state intestacy law dictates who inherits from them.
Now continuing on, if Monica and Chandler have no trust, will all of their estate assets and their values be made public record in a probate proceeding? The general rule is, “Yes,” but there are three exceptions: First, in rare cases, a judge may order to seal the probate records from public view. Second, in states like Louisiana, an executor or heir can request that the detailed inventory of assets that is filed into the public probate record be sealed from public view. And third, only probate assets in your name when you die are public record. Your IRAs and life insurance, for example, so long as you name individuals or charities as beneficiaries (and not your estate) the transfer of those accounts to beneficiaries remains private.
Now, let’s go back to assuming Monica and Chandler DO have a trust and they pass away. What’s different? Well, the trust instrument which shows the names of the trust beneficiaries who stand to inherit after Monica and Chandler pass away does not become public record. So predators and scammers may not know who to go after after Monica and Chandler pass away. However, any transfer of real estate from Monica and Chandler’s trust after they pass away to a beneficiary will be recorded into the public land records.
Now let’s say in the Monica and Chandler trust, they provide that Joey is to receive $100,000, with the rest of the estate going to their three kids. Depending on which state Monica and Chandler lived in, Joey may be able to see the entire trust instrument, or maybe his rights include only to see the provisions of the trust that leave Joey $100,000. However, if there is any litigation surrounding the trust settlement after Monica and Chandler die, the trust instrument will be made part of the public lawsuit record.
Beneficiaries and Trust Assets Remain Private After Death
So, in summary, with the typical RLT arrangement, an individual or couple can, in many cases, keep the public from both discovering the details regarding who your heirs or beneficiaries are; and your RLT can help keep both the existence of trust assets and their values out of the public probate record when you pass away.