Other states require that beneficiaries be told of the trust on their 18th or 21st birthday. In Delaware, a person could be kept in the dark until 30 or 40 or later.
“Parents don’t want to tell someone at 18 that they have this multimillion-dollar trust if they can wait until their mid-20s or early 30s,” said Joshua S. Miller, senior wealth strategist and managing director at CIBC Private Wealth in Boston. “They want kids to get out of college, get a job, start working a bit, mature.”
Mr. Miller said he counseled clients not to let a trust be silent for too long. “A silent trust is a tool,” he said. “I feel strongly that values, legacy and stewardship are really important. I ask clients, ‘Are you able to talk openly about your wealth?’”
Cover your assets
Long ago, people went to foreign jurisdictions, like Switzerland or the Cayman Islands, to protect their wealth from creditors. But states have long since caught up, with Delaware, Nevada, New Hampshire and South Dakota revamping their trust laws to compete for high-net-worth individuals who want to shield their assets.
No state allows money to be shuffled into a trust in response to a lawsuit, a practice called fraudulent conveyance. But several states allow the transfer of money into a trust that would be protected after a period of, say, 18 months. A legitimate use could be by doctors or contactors who might be sued in the course of their career.
The money, though, cannot be commingled with other assets, said Matthew Hochstetler, a trusts and estates lawyer at David J. Simmons & Associates who practices in Ohio and Florida. And the process needs to look reasonable. He said he would advise clients to move no more than 50 percent of their wealth into an asset protection trust.
Bankruptcy judges do not look kindly on people who have separated assets for protection in a state like Nevada and cannot pay their debts in the state where they live.