There are many trusts that can be used when you are devising your estate plan, and you probably have not heard of some of them. We use this blog to demystify these legal devices, and in this post, we will look at five somewhat unusual trusts starting with the secret trust.
Secret Trust
The so-called “secret trust” is not very commonly utilized, but it is an interesting device, and we will explain through the use of a hypothetical example.
Let’s say that Mark has been married for years, and he has a family. On the surface, he lives a conventional life, but he has had a longtime paramour that he wants to provide for in his estate plan.
Mark does not want his wife and children to know about the affair, but he has confided in his brother Ron. He asks Ron to be the trustee of a secret trust that will benefit his out-of-wedlock partner, and he leaves Ron a bequest in his will.
His family does not think that it is surprising that he would leave his brother an inheritance, but in reality, the assets would be distributed to the secret beneficiary in accordance with the terms.
There is a similar device called a semi-secret trust. The creation of the trust would be called for in the will, but the details would not be revealed to anyone other than the secret trustee and beneficiary.
These trusts do not always remain secret, and families will often institute litigation when they become apprised of the existence of such a trust. For this reason, these trusts are not recommended by estate planning lawyers.
Totten Trust
An alternative that can be used to satisfy the objective of someone like our hypothetical Mark is a Totten trust. When you open an account at a bank or a brokerage, you can name a beneficiary, and this is called a Totten trust or a payable-on-death account.
The beneficiary would not have access to the resources while you are living, but they would present the death certificate to the institution after your death. As long as everything is in order, they would assume ownership of the assets in the account.
This transfer would not be subject to probate, so it would take place in a confidential manner.
Blind Trust
If you follow politics, you may have heard of the blind trust, because it is used by people that hold public offices. The assets in a blind trust would be managed by a trustee, and the grantor would not have knowledge of the actions of the trustee. This would avoid conflicts of interest.
In addition to politicians, executives that are bound by securities regulations sometimes use blind trusts.
Rabbi Trust
A very peculiarly named legal device that is used infrequently in the field of estate planning is the rabbi trust. An executive may negotiate a compensation package that includes employer contributions into this type of trust.
The assets would accumulate in a tax-free manner, and this would be similar to the way an individual retirement account works. Presumably, the distributions would be taken when the grantor is in a lower tax bracket after retirement.
Why the name? The first person to act as the beneficiary of this type of trust was actually a rabbi.
Funeral Trust
If you want to make sure that your final expenses are paid in advance, you can establish a funeral trust with a funeral home. You make contributions while you are living, and the assets would be used to cover all of your funeral expenses.
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This post demonstrates the fact that there are many different tools in the estate planning toolkit. The ideal course of action will depend on the circumstances, so you should discuss your options with a Manhattan, New York estate planning lawyer so you can make informed decisions.
If you are ready to do just that, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 212-973-0100.
While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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