Quiet Trusts and Great Expectations

Magwitch, a now-prosperous ex-convict, asks you to create a trust for the education of a young orphan, Pip. He insists that Pip not be informed about the source of the funds. What is your advice?

The trustee of a trust is accountable to its beneficiaries, who are the ones with standing to assert a claim for breach of trust or demand that the trustee file ajudicial accounting proceeding. For the trust to be enforceable as a practical matter, the beneficiaries should be informed of their interest in the trust. Nevertheless, over the past decade more than 30 jurisdictions have enacted legislation—primarily driven by controversial provisions included in the 2000 Uniform Trust Code (UTC)—permitting some form of a “quiet”¹ or “silent” trust in which the settlor abrogates or severely limits a trustee’s duty to inform beneficiaries of the existence of an irrevocable trust or to notify beneficiaries of certain other trust information.² Michigan and Washington have enacted legislation expressly prohibiting the formation of a quiet trust.³