Use a Certificate of Trust to Maintain Privacy

Use a Certificate of Trust to Maintain Privacy

Article by Ryan Conboy

You’ve spent considerable time and expense establishing a Trust to facilitate the management of your assets during any period of disability, and ultimately at your passing. Undoubtedly, one of the reasons you chose to establish a Trust, versus having your assets pass pursuant to a Will, is that a Trust document offers a measure of privacy.  Short of the Trust being contested or some judicial action, your Trust, including the provisions describing who is (and maybe who is not) to receive distributions of your assets is a private document.  In contrast, a probated Will is a matter of public record.

What a surprise then when a financial institution, title company, or other person or entity tells you that you need to provide them with a copy of your entire Trust, or some portion thereof! (Requests are often made for the first and signature pages of the Trust, although to this day I can’t figure out what can magically be gleaned from these limited pages.)  As a result of this unanticipated requirement, you may well silently (or perhaps not so silently) curse the attorney who prepared your supposedly private Trust, grumble, and then prepare to hand over the information assuming this is the only way you will be able to establish the needed account or move forward with selling Trust-owned real estate.

Before you take that step, however, you should know that in Michigan, you have the option to simply provide a Certificate of Trust (a/k/a/ Certificate of Trust Existence). You likely signed such a document when you signed your Trust. If not, your attorney can prepare the Certificate for you.

The Certificate is a “short form” version of your Trust which identifies the name and date of the Trust and any amendments; the name and address of the currently acting trustee(s); and the powers of the trustee(s). In that regard, all that is necessary for the Certificate is to identify the powers related to the purpose for which the Certificate is being given (e.g. - the power to sell real estate if the Certificate is being provided as part of the sale of Trust-owned real estate). The Certificate also describes the revocability of the Trust and the identity of any person(s) holding the power to revoke the Trust, and, if there are co-trustees, whether all, or less than all need to act.  The Certificate does not identify who will, or will not, receive Trust assets and thus maintains privacy with respect to your gifts.

If you provide a Certificate of Trust in lieu of the requested Trust or portions thereof, the requesting party can ask that you also furnish excerpts from the Trust itself evidencing the succession of trustees and the trustee powers.  You should also know that any requesting party who is provided a Certificate of Trust, but nevertheless insists on receiving a complete copy of the Trust, or more than the aforementioned permitted excerpts, could actually be liable for damages, costs, expenses, and legal fees if a court determines that there is no legal basis supporting the demand.  Michigan law sets a high bar and the burden of proof is on the requesting party to prove a legal basis for its demand.

Please note that nothing in Michigan’s Certificate of Trust provisions prevents or limits disclosure of Trust terms to Trust beneficiaries. Beneficiaries are entitled to receive a copy of the Trust terms that describe or affect their interests under the Trust.

If you value the private nature of your Michigan Trust, but face a request for your entire Trust to facilitate a transaction, know that under Michigan law the Certificate of Trust should, in most cases, be sufficient. We most often find that over inclusive requests are typically the result of the requesting party’s lack of knowledge, rather than an intent to view private portions of your Trust.  A friendly note to the requesting party that a Certificate of Trust is sufficient, with a summary of the potential penalties, in most cases results in immediate acceptance of the Certificate of Trust.

 

Posted on October 06, 2014
Tagged as Estate Planning , Probate / Trust Administration