The estate planning process involves highly personal and sensitive decisions related to legacy, assets, family, and heirs. For many individuals and families, keeping those matters private is an important part of the planning process.
Certain planning strategies, including the use of revocable living trusts and irrevocable trusts, can offer a meaningful degree of privacy. Trusts may help assets pass to beneficiaries outside of probate, which is a court-supervised process that can make portions of an estate’s administration part of the public record.
Privacy Protections: Trusts vs. Wills
Unlike a will that is admitted to probate and generally becomes part of the public court record, a trust typically remains a private document that is administered outside of the probate process. This distinction between wills vs. trusts can be particularly important for families concerned about keeping their estate plan private. The use of trusts can help limit public disclosure of information about beneficiaries, asset distributions, and other details of the estate plan, offering families an additional measure of confidentiality.
How Tennessee Trust Law Supports Confidentiality in Trust Administration
As a leading jurisdiction for trust administration, Tennessee’s trust code has incorporated additional safeguards designed to enhance privacy throughout the administration of a trust.
Ability to Keep Trust Records Confidential
A key component of estate planning for high-net-worth individuals is the protection of private financial information and beneficiaries. Even when a trust is designed to avoid probate, there may be circumstances in which court involvement becomes necessary or desirable during its administration. Tennessee law provides a way to help preserve privacy in those situations.
Tennessee’s new statute, T.C.A § 35-15-1106, promotes confidentiality in trust administration by allowing certain information related to trusts to be redacted or filed under seal in court filings. This can be particularly valuable when a court proceeding involves information that the family otherwise expected to remain private.
The statute encompasses a wide array of information which may be redacted to ensure private wealth planning maintains the intended confidentiality and avoids public access. Pursuant to T.C.A. § 35-15-1106(d), “confidential information related to trusts” includes information such as trust documents, settlement and modification agreements, trustee accountings, personally identifying information of trustees and beneficiaries, and any other information the court may deem confidential.
Such confidential information may be redacted or filed under seal without requiring a prior court order so long as unredacted and complete copies are promptly provided to the court in camera–meaning privately for the judge’s review—and to all qualified beneficiaries of the trust. The trustee and qualified beneficiaries must also consent.
These protections can apply if the underlying matter:
- does not involve third parties;
- solely concerns the trustee and the qualified beneficiaries; and
- relates to matters involving the validity, construction, and administration of a trust, including the duties and powers of a trustee and the rights and interests of a beneficiary.
Unless a court orders otherwise, such information must be redacted or filed under seal, without prior court order, in all subsequent filings and orders in the underlying matter as well.
Tennessee law also recognizes that trust proceedings often involve private individuals and private family matters. Accordingly, the statute further provides the existence of a compelling interest for filing documents redacted or under seal is presumed for all matters involving a trust recognizing that such matters “involve purely private litigants, matters of purely private concern with little legitimate public interest, and risk serious embarrassment or specific harm from disclosure.” To determine if the presumption of a compelling interest to file redacted or under seal is overcome, a court may consider, among other factors, whether:
- a public entity or official would benefit from secrecy;
- the information involves a matter of public concern;
- the information is important to other litigation such that sharing the information would promote fairness and efficiency.
Practical Examples:
- A Tennessee corporate trustee has decided to resign as trustee of a trust and desires to obtain court approval of its accountings during its administration. The court filing may be able to redact or place under seal sensitive information such as the identities of beneficiaries, trust assets, and trustee accountings.
- The qualified beneficiaries and trustee of a Tennessee trust desire to obtain court approval of a nonjudicial modification of the Trust. The qualified beneficiaries and trustee agree that the modification is consistent with the grantor’s intent, who is deceased, but wish to seek court approval that the modification does not violate a material purpose of the trust. The petition for approval may redact or file under seal the confidential information related to the matter such as the nonjudicial settlement agreement, identities of the trustee and qualified beneficiaries, and terms of the trust.
These provisions can allow beneficiaries and trustees to obtain the benefit of court involvement when appropriate without necessarily placing sensitive family and financial information into the public record.
Ability to Create Silent Trusts and Appoint Designated Representatives to Receive Information
Another way that Tennessee trust law promotes privacy protection is its authorization of “silent trusts.”
To understand how silent trusts work, it is important to first note that T.C.A. § 813(a) establishes a general rule concerning a trustee’s duty to inform and report to trust beneficiaries. For any beneficiary with a current interest in trust income or principal, the trustee has a duty to keep such beneficiary reasonably informed of the trust’s administration. A trustee typically satisfies this duty by sending periodic statements to a current beneficiary. For any qualified beneficiary without a current interest, the trustee has a duty to respond to such beneficiary’s request for information in a reasonable amount of time, unless such request is unreasonable under the circumstances.
These requirements serve an important purpose: to ensure that a beneficiary has enough knowledge of the trust’s activities to protect his or own interest in the trust.
Tennessee law also recognizes, however, that there may be circumstances in which a settlor has good reasons for delaying or limiting the disclosure of trust information.
Section 813(e) allows for the modification or complete elimination of the statutory duty to inform and report, authorizing what are commonly known as silent trusts.
Why might a family choose this approach?
There can be situations in which a settlor may wish to withhold certain trust information from certain beneficiaries. For example, a settlor may desire that their descendants pursue careers and be productive members of society without reliance on trust income. Here, knowledge of the beneficial interest in a trust may hamper children or grandchildren’s motivation to provide steady sources of income for themselves outside of trust.
Whatever the case may be, Section 813(e) states that the trustee’s duty to inform and report to trust beneficiaries does not apply to the extent provided otherwise in either (i) the trust document itself or (ii) a writing provided by the settlor or other person authorized to direct otherwise in the trust document.
In our example above, this statute would allow the settlor to carry out their wishes regarding trust information by stating outright in the trust document or via written direction to the trustee that a descendant beneficiary shall not be informed of the existence of the trust or be privy to periodic reports concerning the trust’s administration.
Furthermore, Tennessee law permits the use of a “designated representative.” T.C.A. § 35-15-303 allows for the appointment of a designated representative to bind and otherwise represent a beneficiary with respect to trust matters. The effect of this representation is that, provided there is no material conflict of interest between the designated representative and the beneficiary being represented, the beneficiary is deemed to have received any notice or report that a designated representative receives on behalf of such beneficiary.
Both silent trust provisions and designated representatives can give families additional flexibility over the timing and flow of sensitive trust information, while still providing a framework for representation and oversight during administration.
Tennessee’s Approach to Privacy Protections
Privacy in estate planning is not simply about keeping information confidential. For many families, it is about preserving discretion around personal financial matters, protecting beneficiaries, and maintaining greater control over who has access to sensitive information.
Collectively, the statutory safeguards in this article reflect Tennessee’s commitment to offering the ability to preserve confidentiality in trust administration. By providing mechanisms that may limit the disclosure of sensitive trust, beneficiary, and financial information, Tennessee law offers meaningful tools to preserve privacy while carrying out the purposes of the trust.
These protections further reinforce Tennessee’s position as a favorable jurisdiction for individuals and families seeking both sophisticated trust administration and a heightened degree of discretion.
Privacy and the Role of the Trustee
For families who value privacy, the choice of trustee can be just as important as the provisions of the trust itself. Effective trust administration requires an understanding of the family, its objectives, and the importance of handling sensitive matters with discretion. As an independent Tennessee trust company, Cumberland Trust works alongside families and their advisors to provide thoughtful, personalized trust administration. Our approach remains mindful of the grantor’s intent while carefully navigating the administrative and privacy considerations that may arise over the life of a trust.
If you have questions about how to promote and protect your family’s privacy in your estate plan, please speak with an estate planning attorney.
Disclaimer: This is not intended to constitute legal advice. Please seek legal counsel to determine the best estate planning for you based on your specific needs and circumstances.