Extra Privacy Gained from Trusts

     Increased privacy is one of the major benefits of using a living trust in estate planning. The Trust allows you to avoid public disclosure of the assets of the estate and the distribution provisions of the Will in the Probate Court. It also allows the Grantor to provide Beneficiaries with information that applies to their own distribution but not the distributions for other Beneficiaries. 

     The Michigan Trust Code (MTC), which governs the duties and powers of the trustee along with the rights and interests of trust beneficiaries, requires that a trustee of an Irrevocable Trust or a Living Trust which became Irrevocable upon the death of the Grantor inform a trust beneficiary of the following information:

• That a trust exists that names the person as a beneficiary 
• The identity of the Grantor of the trust. 
• The Trustee’s identity, including address and telephone number 
• The court, if any, in which the trust is registered The terms of the trust that describe or affect the beneficiary’s interest and relevant information about the trust property.

     The MTC also mandates that the trustee must provide an annual accounting of the Trust property to everyone who receives, or may receive, a distribution from the Trust. The Grantor of a Trust may override that statutory requirement and dictate whom, if anyone, the Trustee must provide with an accounting. It is important to note that even when the terms of the trust waive the annual accounting, a Probate Judge has the authority to order the Trustee to provide the court, or other parties, with an accounting.

     The benefits of these statutes to a Grantor include the ability to provide bequests of different values for children without revealing the differences in gifting. Alternately, it allows the Grantor to make equal gifts to multiple children, but under different terms, without creating strife because one child receives their bequest outright while other gifts continue in trust with restrictions on distribution. 

     The Michigan Trust Code strikes a balance between the Grantors’ right to privacy and the Beneficiary’s ability to confirm the Trustee meets their fiduciary duty. The information that Trustees must provide to a beneficiary gives that person sufficient information about their rights to the trust assets to determine whether the Trustee is doing their job. If the beneficiary suspects something is amiss, the information gives them a basis for the Probate Court to order a complete accounting. 

     It is important for successor trustees to understand the law and review the terms of the trust in order to determine the scope of their duty under the trust and applicable law. Often the attorney who drafted the trust document is the most useful resource for successor trustees in determining what information the trustee must provide to beneficiaries. A responsible attorney will provide clients with contact information and assurances that they will be available to help the successor trustees administer the trust when the time comes.

Matt Ferrara