While some clients flaunt their wealth, others like to keep things quiet. Sometimes, such "financial modesty" is motivated by a concern that knowledge of family wealth could result in disincentivized children or grandchildren. Although some may question whether such financial modesty is a virtue, there is no requirement that parents disclose their net worth to their children.

However, the analysis changes when wealth is transferred to a so-called "Quiet Trust"—an irrevocable trust that purports to limit or prohibit the trustee from disclosing the assets of the trust, or even the trust's very existence, to some of the beneficiaries. New York trusts and estates practitioners will undoubtedly encounter a Quiet Trust at some point, either because a client would like to create one, or needs guidance as a beneficiary or trustee of one, and they must understand the challenges posed by Quiet Trusts in New York.

Challenges Faced by Trustees of New York Quiet Trusts

The crux of the challenge is reconciling trustees' fiduciary duty, which generally leans in favor of disclosure of trust information to beneficiaries, with explicit provisions of a trust that limits or prohibit disclosure. Depending on how stringent the trust's limitations on disclosure are, trustees might find it challenging to carry out the trust's terms while also fulfilling their fiduciary duty and limiting their potential liability.