Want to Keep Your Finances Private? We Have an Option for You

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When was the last time you invited your neighbor over to check out your investment portfolio, or showed your bank balance to a coworker? The answer is probably “Never—why would I even consider doing that?” And, of course, you wouldn’t; your finances are your private business, right? Sort of. You may not be aware that when you die, if your estate goes through probate, your financial matters can become a matter of public record, since they are contained in court filings. If you want to keep your finances private, you need to keep your assets out of probate.

The most common way most people keep assets out of probate is through the use of a living trust. Trusts can offer not only privacy, but a variety of other benefits depending on your needs.

Keep Your Finances Private With a Trust

If you’ve looked into making or updating your estate plan recently, you have probably heard a lot about living trusts. There is a reason trusts are increasingly popular: they are a relatively simple and economical way to avoid probate, maintain financial privacy, and streamline the transfer of assets from the deceased to his or her intended beneficiaries.

There are many types of trusts, and they can accomplish a number of goals, from protecting assets from creditors to tax planning to providing for loved ones with special needs without jeopardizing government benefits they receive. Trusts may be structured differently depending on their function, but all trusts have some things in common.

All trusts involve three parties: a grantor (also called settlor) who creates the trust and funds it with assets; a trustee, who manages the trust assets and makes distributions; and one or more beneficiaries, who receive distributions from the trust. All trusts also keep assets out of probate, and therefore safe from the prying eyes of the public.

Not keen on having someone else manage your assets? Not to worry. With a living trust, you can assume the role of not only grantor, but also trustee and beneficiary during your lifetime. In practice, during your lifetime, there is very little difference between owning assets in your own name and holding them in a trust. You still have complete control over the assets and can use them as you see fit. You can also amend or revoke a living trust at any time while you have capacity to do so.

Not keen on having someone else manage your assets? Not to worry. With a living trust, you can assume the role of not only grantor, but also trustee and beneficiary during your lifetime.

The difference between owning an asset outright or placing it in a trust becomes evident when you die, or become legally incapacitated (such as by Alzheimer’s or dementia). When you are no longer able to serve as trustee, a successor trustee named in the trust instrument seamlessly steps into your shoes. No court appointment is necessary; the person you have appointed can instantly assume the role of trustee. Assets are distributed immediately to beneficiaries, or may be, if the trust instrument directs, managed for their benefit by the trustee for some time.

Trust documents are not filed with the probate court. Nor are they required to be registered with the state, like a corporation. The trust instrument and related documents need not be accessible to anyone but the grantor, trustee, and under most circumstances, the beneficiaries.

Assets That Can Be Held in a Private Trust

Many types of assets can be managed in a trust for privacy purposes, including real estate. One advantage of this is that a grantor with assets in multiple states can place them all in a single trust, preventing them from having to pass through probate in each of those states. By contrast, without a trust, if a Michigan resident had a primary home in Michigan and a vacation property in Ohio, and held those properties in her own name, her estate would have to go through probate in Michigan, and there would need to be an ancillary probate proceeding in Ohio for the real estate located there.

Other assets that can be held in trust include:

  • Cars, boats, motorcycles, and other vehicles
  • Corporate stock
  • Artwork and other collectibles
  • Leases and mortgages

Creating a trust may cost slightly more than drafting a will to dispose of your assets. However, the time and effort saved in bypassing probate, not to mention the cost savings of avoiding the probate process, may make the additional cost worth it.

For many people, the real benefit of a trust is keeping their finances private. While most celebrities (though not all ) use trusts to keep their finances out of the public eye, you don’t have to be rich or famous to benefit from the privacy protection of a trust.

If you are interested in using a living trust to keep your finances private, we invite you to contact our law office to schedule a consultation.

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