Friday, May 9, 2008

Privacy of Trusts Challenged


A post recently in the Wills, Trusts and Estates Prof Blog mentioned a paper written by Frances H. Foster, the Edward T. Foote II Professor of Law at Washington University in St. Louis. The St. Louis connection lets me finally post one my favorite photos I took during a trip there several years ago.
But I digress. I have not read the full article, but the gist of it, from the Prof Blog, is that the issue of trust privacy has not been properly addressed by reformers, and that the "human cost" of trust privacy should be considered when discussing how the laws related to trust privacy should be reformed.
Presumably, the main concern here is that because trusts are private, they can be created and administered outside the purview of interested parties. So family members, heirs and relatives would not be able to know who the beneficiaries of a trust were, how the trust assets are to be distributed, and what the trustee is doing with the trust assets.
Living tusts, unlike wills, do not go through probate when the settlor, or trust creator, dies. This means that there is no automatic court supervision of the management and distribution of a trust on the death of the settlor, as there is with a will. That does not, however, mean that the court never gets involved with trusts. When a settlor dies or when a trustee changes, California Probate Code section 16061.7 requires the trustee to notify the beneficiaries of a trust, the heirs of the settlor, and where the trust is a charitable trust subject to the supervision of the California Attorney General, the Attorney General. This allows these parties time to challenge the trust, for example. California law also requires trustees to prepare accountings of the trust administration, which is designed to keep beneficiaries up to date on the trust's inner workings. Interested parties can also contest the trust in much the same way that they can challege a will.
While it is true that there is no automatic court supervision of trusts, there are many court procedures for making sure that individuals' interests are protected in a trust. It is certainly debateable whether a trust must be made public in the way that a will is when many of the challenges available to a will are also available to a trust.


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