Technical article

Telling Your Children What Is in the Trust, and When

It put 60% of those failures down to low trust and poor communication (tier C, because neither source shows the data).

By Neil Solomon · 4 min read

Imagine a mother who has set up a trust for her two daughters. One lives in the United States and one in Germany. The trust holds savings, and it will pay them income for many years. She wonders when to tell them what it says. Today, near the end, or somewhere between?

There is no rule that settles this. The sources do give three things to weigh: what the daughters must do once they know, what the trust deed lets them see, and what studies say about families that talk.

What knowing sets off

Some duties start the moment an heir hears about a gift or a payment. In Germany, every taxable acquisition goes to the inheritance tax office within three months of learning of it. In the United States, an heir who receives a distribution from a foreign trust files Form 3520, due April 15 with an extension to October 15. In Italy, a discretionary beneficiary of a foreign opaque trust shows the interest on the tax return, according to a 2021 ruling. In Mexico, the tax authority can ask a beneficiary for information about the controlling beneficiaries of a trust.

So an heir who first hears of the trust from a tax office, or from a bank, may also meet a deadline.

What the deed lets an heir see

Trust law differs here. A law firm note says beneficiaries in Jersey may have information rights. In the Cayman Islands, the special trust law lets the deed take information and enforcement rights away from certain beneficiaries and give them to a named enforcer. One California firm advises that trustees keep the beneficiaries informed. So what an heir may ask the trustee depends on the place and the deed.

Three doors

What families report

Two studies are often quoted. A survey of 1,500 high-net-worth Americans, reported by a broker's blog, found that two-thirds of those planning to leave money had put off the family talk. Only 39% had given heirs instructions. Only 26% felt their heirs were prepared. And 99% of heirs said they would respect their parents' wishes. The blog does not give the survey year, so this is tier U.

An older study, reported in the book Preparing Heirs (dated 2003 by one source and 2005 by another) and cited secondhand, followed 2,500 families over 20 years. It found 70% lost control of their assets and family harmony by the third generation. It put 60% of those failures down to low trust and poor communication (tier C, because neither source shows the data). Another source gives 3,250 families for the same study, and the sources differ on the sample.

Neither study measures trusts. They measure what happens when families do not talk.