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Privacy concerns and trusts

There are many benefits that having trusts in one's estate plan can potentially have. One such benefit are privacy benefits. Trusts can sometimes provide a greater degree of financial privacy than other estate planning mechanisms.

However, there are things that can weaken a trust's privacy protection abilities. One is if litigation ends up arising in relation to a trust. This is because a lot of financial matters can potentially end up coming out into the open in court proceedings related to trust litigation.  

Thus, if privacy is something a person forming a trust cares a great deal about, one of the things they may want to do is take steps to try to reduce the chances of disputes or litigation arising in connection to the trust in the future. There are several future-conflict-prevention steps individuals can take when forming a trust. Some examples are:

  • Exercising care when selecting a trustee. How a trustee acts can play a big role in how likely disputes and litigation are to arise in connection to a trust. This is one of the many reasons why picking the right trustee can be vital when forming a trust. 
  • Exercising care when picking the trust structure and the terms of the trust. Sloppy and ill-suited trust structures and terms could sow the seeds for future disputes, whereas well-thought-out and well-tailored structures and terms might make future disputes less likely. 
  • Discussing how the trust will work with one's relatives and beneficiaries after the trust is formed. Such discussions can help bring the expectations of one's relatives and beneficiaries regarding the trust in line with what the trust will actually do, which could help keep relatives/beneficiaries from being caught off-guard by aspects of the trust in the future. 

Skilled estate planning lawyers understand how the things that are done when a trust is formed can impact how likely the trust is to achieve its intended purposes (including any intended privacy purposes) and the likelihood of disputes arising in relation to the trust in the future. Such attorneys can help individuals who wish to have a trust in their estate plan with forming their trust in a way that is consistent with what they want their trust to achieve. 

Source: The Wall Street Journal, "To Keep Trusts Private, Estate Planners Avoid Litigation," Anna Prior, May 12, 2015

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