Delaware has some unique probate laws. One example involves “silent” trusts. Sometimes these are known as confidential or quiet trusts. Delaware is among the few states that allow true silent trusts.
The name comes from the fact that someone can establish the trust without notifying the beneficiary. Typically, that person (known as the settlor) designates a time or specific event that requires the notification.
Why make the trust “silent?”
A person might decide that they don’t want a child or other family member notified that they’ve established a trust for them until they pass away. They may not want them notified until both parents are deceased. They may tie the notification to an event in the beneficiary’s life, like a college graduation or the purchase of a first home.
The reasons for establishing a silent trust vary. Parents often don’t want their children to go into adulthood knowing that they’ve got a large amount of money set aside for them because they don’t want to lessen their ambition. Sometimes, a parent will establish a silent trust for a child they haven’t publicly acknowledged as theirs. These are just a couple of examples.
The choice of trustee is critical
Because the beneficiary won’t know about the trust until a designated time (possibly years after the settlor’s death), the choice of an honest, capable trustee (or successor trustee if the settlor is the initial trustee while they’re alive), is crucial to make sure the assets in the trust will be in good hands.
With most trusts, the beneficiary can monitor activity, like investments, even if they aren’t yet allowed to access the assets. Since they can’t do that if they don’t know about it, people often choose a professional trustee to manage a silent trust.
A silent trust isn’t necessary or even appropriate for most situations. Other types of trusts might meet your needs just as well, if not better. However, if you think it might be an estate planning tool worth exploring, it’s important to have sound estate planning guidance to review this and other options.
