You probably don’t place the process of estate planning in the realm of intrigue and mystery. This is understandable, but there are actually some interesting trusts in the field that are a bit mysterious. We unshroud five of them in this post.
Secret and Semi-Secret Trusts
Imagine this scenario: a man has a longtime mistress, and his brother is the only person that knows about the relationship. The fellow wants to leave an inheritance to his paramour, but he does not want anyone else in the family to know about it.
He leaves an inheritance to his brother in a simple will, and this does not raise any eyebrows. However, the family does not know that the testator made an arrangement with his brother to use the inheritance to fund a secret trust for the benefit of the significant other.
In addition to this approach, there is also a semi-secret trust. The existence of the trust would be revealed in the will, but the terms would be cloaked in secrecy.
Estate planning attorneys will usually advise clients to steer clear of these secret trusts because of the potential for messy estate litigation.
Someone that is in the situation above may want to consider the utilization of a Totten trust as an alternative. When you open an account at a bank or a brokerage, you can name a beneficiary. This is called a payable on death account or Totten trust.
If you have this type of account, the beneficiary would obtain a death certificate after your passing. It would be presented to the financial institution, and the funds would be released to the beneficiary.
This transfer would not be subject to probate, which is a legal process that takes place under the supervision of a court. Probate is a public proceeding, and the records are available to anyone that is interested. The transfer of a Totten trust to a beneficiary would be confidential.
Another trust that has a touch of the secrecy factor is the blind trust. An executive that is beholden to securities regulations may establish this type of trust to steer clear of legal difficulties.
The trustee would manage the assets in the trust, and the grantor would not have any input with regard to the financial decisions, and they would have limited contact in general. These trusts are also utilized by people that hold political offices.
Why would there be a trust that is exclusively used by rabbis? This is a good question, and the name of the trust would invite it, but it is deceiving.
A rabbi trust can be used by a company to compensate an executive. The assets would accumulate in a tax-deferred manner, and there would be tax savings if the distributions are taken when the beneficiary is in a lower tax bracket.
The instrument is called a rabbi trust because the first time that one of these trusts was utilized and approved by the IRS, a rabbi was the beneficiary.
When you are thinking about the position your family will be in immediately after you pass away, final expenses may cross your mind. You can potentially utilize a funeral trust to set aside assets that will be used to cover these costs.
There are funeral homes that offer this option, and you should do your research to make sure that you are working with a reputable entity if you go in this direction. You would fund the trust while you are living, and the assets would be used to pay your final expenses.
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As you can see, there are many different approaches that can be taken when you are planning your estate. The ideal course of action will depend on the circumstances, so personalized attention is key. This is exactly what you will get when you choose our firm.
You can schedule a consultation appointment at our Burbank, CA estate planning office if you call us at 818-937-2335. There is also a contact form on this site you can use if you would prefer to send us a message.