Independent Thinking^®

Shh: What Families Need to Know About Silent Trusts

Silent trusts, sometimes known as quiet trusts, are attracting renewed interest among families keen to maintain privacy in an increasingly intrusive world, as well as to preserve and transfer wealth. A silent trust allows the person creating the trust, known as the settlor or grantor, to delay or restrict the disclosure of a trust’s existence or details to its beneficiaries, either for a specified period or until a defined event occurs.

That trigger could be the death of the settlor, the beneficiary reaching a certain age, or even reaching a milestone such as graduation or marriage. This contrasts sharply with traditional trusts, which generally obligate the trustee to keep adult beneficiaries reasonably informed about the trust’s administration and assets.

Managing the timing of trust disclosures can allow beneficiaries time and freedom to mature, so they will be able to understand and responsibly manage their wealth. But proper preparation is essential.

Background

The legal framework for silent trusts in the U.S. developed alongside broader trust law reforms, particularly following the Uniform Trust Code, or UTC, of 2000. The UTC generally requires trustees to notify “qualified beneficiaries” about the trust’s existence, their rights to information, and any trustee changes. However, growing demand from families and estate planners led many states to relax or waive these disclosure requirements.

Delaware, Nevada, South Dakota, Alaska, and Wyoming now permit silent trusts or allow delayed beneficiary notice. Delaware, the most notable example, lets trustees postpone notification based on factors like the beneficiary’s age, the settlor’s or spouse’s lifetime, a set term, or a specified date or event. It also allows the use of a designated representative to receive information on the beneficiary’s behalf, balancing confidentiality with protection of beneficiary interests.

Applications

Silent trusts are not a one-size-fits-all planning mechanism. Like any estate-planning tool, a silent trust should only be incorporated in an estate plan when appropriate. These types of trusts are designed to delay disclosure for specific reasons, say to prevent an attitude of entitlement or to protect immature or otherwise vulnerable beneficiaries, by reducing the risk of undue influence or exploitation. It is important to note, however, that a silent trust should not be a substitute for financial education. Beneficiaries need to be prepared.

Silent trusts can also be used to protect confidential planning decisions that may otherwise cause conflict among family members. For example, providing equal division of assets is not always the most equitable solution. Allowing the settlor to control who has access to what information — and when — can enhance privacy. The fewer people with access to sensitive financial information, the more likely the information will remain confidential.

Silent trusts aren’t meant to stay silent forever. Disclosure can be aligned with life milestones such as completing higher education, reaching a certain age, or demonstrating financial responsibility, which help ensure that beneficiaries are better prepared to manage the complexities of wealth.

Considerations

With increased flexibility comes complexity. While it is often the case that a beneficiary who is unaware of a large financial safety net will be more likely to focus on their education, career, and personal development, it may also be the case that withholding information fosters a sense of distrust or frustration as they are left wondering why their loved one did not trust their ability to handle the information from the start. Silent trusts are not designed to create distrust among family members but rather to provide an additional safeguard in the appropriate circumstances. Accordingly, it is essential to have a thoughtful plan in place to help anticipate the individual needs of trust beneficiaries.

In addition, the duty of trustees to keep beneficiaries informed is one of the foundational principles of trust law — without it, a trustee may be seen as answerable to no one. Silent trusts therefore must balance transparency with privacy, which can increase the risk of perceived or actual trustee misconduct, especially when administered by an individual trustee not otherwise subject to external oversight.

Another issue to consider is that if a silent trust is established in a state without a clear enabling statute, it may be challenged or forced to comply with traditional notice requirements. Settlors must therefore collaborate with experienced advisors to choose the appropriate jurisdiction, and to ensure that the trust meets the necessary requirements to take advantage of that jurisdiction’s laws, including appointing a trustee in that state.

Also worth noting is whether an antenuptial agreement (or “prenup,” as they are commonly called) will be upheld in the event of a divorce if disclosure of a silent trust is not made at the time a prenup is signed. Courts vary on whether failure to disclose a trust interest affects a prenup’s validity, making jurisdiction-specific legal advice critical.

Summary

When considering whether a silent trust may be appropriate, it is essential that individuals work with jurisdiction-specific legal experts that can help choose a trust-friendly state with statutory support for silent trusts. It is also important that the settlor defines clear disclosure triggers to govern when and how disclosure occurs and that are in line with their estate-planning goals. The death of the settlor or settlor’s spouse, age, graduation, and marriage are some common milestones used in silent trust planning. Appointing a capable designated representative and trustee is also important to ensure that this person can act as an intermediary in lieu of the beneficiaries until and even after the disclosure event occurs.

Silent trusts can offer families a blend of discretion, flexibility, and control, serving as a strategic tool to align wealth transfer with family values and long-term goals. However, this tool requires thoughtful planning and expert guidance. When used wisely, silent trusts have the potential to contribute to a legacy of responsible stewardship, privacy, and harmony for generations to come.

As a Delaware-based national trust company, Evercore Trust Company is experienced in administering silent trusts. For tailored advice on silent trusts and estate-planning strategies, consult your Wealth & Fiduciary Advisor.

Paula Stumne is a Managing Director and Wealth & Fiduciary Advisor at Evercore Wealth Management and Evercore Trust Company. She can be contacted at [email protected].

Maria Plese, Vice President and Wealth & Fiduciary Advisor, contributed to this article.