Why This Plan Works

In the typical arrangement, the trust agreement specifies that you—as the settlor—have the right to revoke the trust at any time and that the trustee will perform only those activities specifically directed by you. Real estate is acquired or transferred into the name of the trust and financial accounts are opened at the bank or brokerage firm you choose.

The name on the property and the accounts is changed from your name to the name of the trust. For example, if we use the ABC Trust Company, the name of the trust could be ABC Trust #4006. Title to your home or other real estate is removed from your name and simply reads ABC Trust #4006. The trustee acts on your behalf for executing purchase or loan documents. Many lenders are familiar with these types of trusts and are comfortable with a mortgage loan in the name of the trust. You are required to maintain and manage the property in the trust. The trustee holds legal title for your benefit, but your responsibilities are not diminished.

An account at a bank or brokerage firm can also be opened in the name of ABC Trust #4006. The account opening agreement and the signature card are signed by the Trust Company. The tax identification number of the Trust Company is furnished. Your name and identifying information are not supplied to the financial firm—there is no visible connection between you and the trust.

This arrangement creates a true model for privacy because the financial firm and its employees do not know that you are the true owner of the account. Any inquiries regarding an account under your name or Social Security number will come up empty. They can’t give away secrets they don’t know. Your name is not in the computer and, as far as they know, you don’t exist. The computer can apply sophisticated software analysis to the account to track savings and investment activity, and the firm can devise perfect product fits based upon the patterns evidenced in your account. But the firm can’t sell your information, or give it to its sales force because the firm doesn’t have a name behind the account. Now you control access to your personal information. It belongs to you and not the bank, and you can control what you supply to the outside world.

This strategy successfully protects the privacy of your sensitive financial information by strictly limiting the access. The information is secure because it is not made available to the bank, its thousands of employees, and its sales force. In contrast to your bank, the trust company has a legal and contractual obligation to maintain the confidentiality of the trust. It is in the business of providing fiduciary services and cannot breach the trust agreement without serious legal ramifications. It is certainly true that if somebody wants information badly enough they can penetrate any source. But a trust company with the proper safeguards in place will seriously reduce the risk of unauthorized disclosure.

In addition to the privacy benefits, all of the typical estate planning advantages can be achieved. The trust will perform the same role as a living trust to avoid probate, minimize estate taxes, and pass your property according to your wishes.