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Trust Privacy Frances H Cornell Law Review Volume 93 Article 14 Issue 3 March 2008 Trust Privacy Frances H. Foster Follow this and additional works at: http://scholarship.law.cornell.edu/clr Part of the Law Commons Recommended Citation Frances H. Foster, Trust Privacy, 93 Cornell L. Rev. 555 (2008) Available at: http://scholarship.law.cornell.edu/clr/vol93/iss3/14 This Article is brought to you for free and open access by the Journals at Scholarship@Cornell Law: A Digital Repository. It has been accepted for inclusion in Cornell Law Review by an authorized administrator of Scholarship@Cornell Law: A Digital Repository. For more information, please contact [email protected]. TRUST PRIVACY Frances H. Fostert INTRODUCTION ................................................. 555 I. THE PUBLIC/PRIVATE DISTINCTION BETWEEN WILLS AND WILL-LIKE TRUSTS .......................................... 559 II. THE HUMAN BENEFITS OF TRUST PRIVACY ................. 567 A . Settlors ............................................. 567 1. Control over Identity and Reputation ............... 567 2. Control over Property.............................. 570 B . T rustees ............................................ 573 C. Beneficiaries ........................................ 575 1. Protectionfrom the Outside World .................. 575 2. Protectionfrom Each Other ........................ 576 3. Protectionfrom Themselves ........................ 581 D . Third Parties ....................................... 582 III. THE HUMAN COSTS OF TRUST PRIVACY .................... 584 A . Settlors ............................................. 585 1. Lifetime Costs of Trust Privacy ..................... 585 2. Post-Mortem Costs of Trust Privacy ................. 590 a. The Price for Protecting the Privacy of Living Settlors' Trusts ............................... 590 b. The Pricefor Protecting the Privacy of Deceased Settlors' Trusts ............................... 595 B . Trustees ............................................ 598 C. Beneficiaries ........................................ 605 D . Third Parties ....................................... 610 CONCLUSION ................................................... 613 INTRODUCTION In a landmark 1984 article, Professor John Langbein described the "nonprobate revolution" in transmission of American wealth.' He showed that Americans had turned en masse to donative devices that t Edward T. Foote II Professor of Law, Washington University School of Law. A.B., Princeton University, 1977; M.A., J.D., Yale University, 1981; J.S.D., Stanford University, 1987. I thank Susan Appleton, Sam Bagenstos, Tom Gallanis, Adam Hirsch, Lynn LoPucki, Daniel Mandelker, Laura Rosenbury, Peter Wiedenbeck, and participants in a faculty work- shop at Washington University School of Law for comments on earlier drafts of this Article, and Yasminat Assis, Demetrios Datch, and Jeanne Mishkin for assistance with research. I John H. Langbein, The Nonprobate Revolution and the Future of the Law of Succession, 97 HARv. L. REv. 1108, 1108 (1984). CORNELL LAW REVIEW [Vol. 93:555 accomplished all the purposes of a will without the costs, strictures, and inconvenience of probate.2 Professor Langbein argued that it was 3 time to recognize these devices for what they were-"will substitutes. He called for a future "unified American law of succession" to cover 4 both wills and will substitutes. Today, this unification process is well underway. 5 Wills doctrines and rules, such as lapse, 6 ademption,7 mental capacity standards, 8 un- worthy heirs exclusions, 9 and revocation upon divorce,10 increasingly extend to even the most widely used will substitute-the revocable in- ter vivos or living trust (revocable trust).11 Yet, one distinction re- 2 Id. at 1109-25 (discussing the use of will substitutes); see alsoJohn H. Langbein, The Twentieth-Century Revolution in Family Wealth Transmission, 86 MICH. L. REv. 722 passim (1988) (discussing changing patterns in family wealth transmission). 3 Langbein, supra note 1, at 1125-34, 1140-41 (arguing that courts should abandon the fiction that nonprobate transfers are lifetime transfers and treat those transfers as will- like will substitutes). 4 Id. at 1141. 5 This unification has been a significant feature of recent Uniform Codes and Re- statements. See 2 RESTATEMENT (THIRD) OF PROP.: WILLS AND OTHER DONATIVE TRANSFERS § 7.2 cmt. a (2003) ("This Restatement (along with the Restatement Third, Trusts, the Revised Uniform Probate Code, and the Uniform Trust Code) moves toward the policy of unifying the law of wills and will substitutes."). 6 See, e.g.,S.C. CODE ANN. § 62-7-606 (2005) (setting out antilapse provisions for revo- cable trusts); UNIF. PROBATE CODE §§ 2-706-707 (amended 2006) (establishing antilapse rules for nonprobate transfers and future interests under the terms of a trust); 1 RESTATE- MENT (THIRD) OF PROP.: WILLS AND OTHER DONATIVE TRANSFERS § 5.5 cmt. p (1999) ("Anti- lapse statutes, however, apply by analogy to revocable trusts and other will substitutes."). 7 See, e.g., Wasserman v. Cohen, 606 N.E.2d 901, 904 (Mass. 1993) (applying "the doctrine of ademption, as traditionally applied to wills" to a revocable inter vivos trust). 8 See, e.g., Upman v. Clarke, 753 A.2d 4, 6 (Md. 2000) (holding that undue influence rules applicable to wills apply to a revocable trust); In re Estate of Tisdale, 655 N.Y.S.2d 809, 811 (Surr. Ct. 1997) (holding that beneficiaries of a revocable trust, like will beneficiaries, have a right to a jury trial in probate proceedings to set aside the trust on grounds of improper execution, lack of capacity, undue influence, and fraud). 9 See, e.g., CAL. PROB. CODE § 250(a)(1) (West 2002 & Supp. 2007) ("A person who feloniously and intentionally kills the decedent is not entitled to ... [a]ny property, inter- est, or benefit under a will of the decedent, including any general or special power of appointment conferred by the will on the killer and any nomination of the killer as execu- tor, trustee, or guardian made by the will."); OR. REv. STAT. § 112.465(1) (2005) (barring the decedent's slayer from taking from the decedent "by intestate succession, by will or by trust"). 10 See, e.g., OKLA. STAT. ANN. tit.60, § 175(A) (West 1994) (providing for revocation of trust provisions in favor of the settlor's former spouse upon divorce or annulment). In states that have adopted the Uniform Probate Code (UPC), revocation upon divorce ap- plies to the relatives of the divorced spouse as well. UNIF. PROBATE CODE § 2-804(b) (1) (i) (amended 2006) (revoking "any disposition or appointment created by law or in a gov- erning instrument to a relative of the divorced individual's former spouse"). But see gener- ally Susan N. Gary, Applying Revocation-on-Divorce Statutes to Will Substitutes, 18 QUINNIPIAC PROB. L.J. 83 (2004) (presenting a critical analysis of revocation-on-divorce statutes and the continuing limitations in their application to will substitutes). 11 See generally 1 RESTATEMENT (THIRD) OF TRUSTS § 25 & cmts. (2003) (discussing the use of "[r]evocable inter vivos (or living) trusts" and the extension to such trusts of doc- trines and rules governing wills); AdamJ. Hirsch, InheritanceLaw, Legal Contraptions,and the 2008] TRUST PRIVACY mains unchallenged. Wills-and any trusts contained therein-are public record, available to beneficiaries, heirs, thieves, reporters, and "inquiring minds" alike.12 "Will-like"13 revocable trusts, including 1 4 those that continue for decades after the settlor's death, are private. Indeed, in most states, even current beneficiaries of a revocable trust cannot view the full trust document that defines their rights and 15 interests. This treatment of wills and their "functional equivalent,"'16 the revocable trust, is not only inconsistent but also dangerous. As Profes- sors Jesse Dukeminier and Stanley Johanson have suggested, the cur- Problem of Doctrinal Change, 79 OR. L. REv. 527, 542-45 & n.62 (2000) (discussing will substi- tutes and efforts to extend testamentary doctrines to "nominally complete, nontestamen- tary transfers"). One state has even extended will execution requirements to revocable trusts that "dispose of the trust property on or after the death of the settlor other than to the settlor's estate." FLA. STAT. ANN. § 737.111(1), (4) (West 2005). 12 SeeJESSE DUKEMINIER & STANLEY M.JOHANSON, WILLS, TRUSTS, AND ESTATES 390 (6th ed. 2000) ("A will is a public record, open to disappointed heirs, newspapers, and the just plain curious."). Books, periodicals, newspapers, and even Web sites regularly feature wills of particular public interest. See, e.g., HERBERT E. NAss, WILLS OF THE RICH AND FAMous (2000) (reproducing sixty-eight wills of the "rich and famous"); Where There's a Will, PEO- PLE, June 9, 2003, at 107 (discussing "weird but wonderful legacies," including an actor's will that left the actor's skull to a Chicago theater company to use in productions of Ham- let); Court TV News, Famous Wills, Nov. 12, 2007, http://www.courttv.com/people/wills (reproducing celebrities' wills). 13 Langbein, supra note 1, at 1109 (referring to "will-like modes of transfer"). 14 See DUKEMINIER &JOHANSON, supra note 12, at 390-91 (discussing privacy of revoca- ble inter vivos trusts); Lucy A. MARSH, PRACTICAL APPLICATIONS OF THE LAW: WILLS, TRUSTS, AND ESTATES 125-26 (1998) (reproducing and discussingJohn Lennon's will, under which Lennon "was able to secure the benefits of privacy" by transferring the residue of his estate to a preexisting inter vivos trust that was "not a matter of
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