How to Set up an Anonymous Trust: A Step-by-Step Guide 2024

Last Updated on September 25, 2024 by Dr. Gabriel O’Neill, Esq.

An anonymous trust keeps the identities of its beneficiaries and the trust’s terms hidden from the public, offering privacy and confidentiality. This type of trust is often chosen to protect beneficiary privacy and maintain discretion over the trust’s details.

In this guide, we’ll walk you through the steps to set up an anonymous trust. This includes selecting a trustee, drafting the trust document, transferring assets to the trust, naming beneficiaries, and registering the trust.

It’s crucial to consult with a lawyer or financial advisor to ensure your trust is structured correctly and complies with all legal requirements. If you’re thinking about establishing an anonymous trust, read on to learn more.

What Is an Anonymous Trust?

An anonymous trust is when the identity of the trust’s beneficiaries and the terms of the trust remain hidden from the public, as mentioned above. Through this trust, beneficiaries can keep their privacy and the terms of the trust stay confidential. 

Typically, a settlor creates anonymous trusts. They then transfer ownership of their assets to the trust. Also, they appoint a trustee to manage the trust on behalf of the beneficiaries. The trustee is responsible for administering the trust according to the terms of the trust document. Plus, the trustee ensures that the trust’s assets are used for the benefit of the beneficiaries.

You can use anonymous trusts for a variety of purposes. For example, to provide financial support to a spouse or family member, charitable giving, or preserving assets for future generations. You can also use them to protect the privacy of beneficiaries and to keep the terms of the trust confidential. Particularly in cases where the terms of the trust may be sensitive or controversial.

Types of Anonymous Trusts

There are several types of anonymous trusts that you can use for different purposes.

Charitable Trusts

You can create charitable trusts for the purpose of supporting a charitable organization or cause. These trusts can be anonymous if the settlor wants privacy or if the terms of the trust are sensitive or controversial.

Spendthrift Trusts

Spendthrift trusts are designed to protect the trust’s assets from being used to pay the beneficiary’s debts or other financial obligations. These trusts can be anonymous if the settlor or the beneficiary wishes to protect their privacy.

Testamentary Trusts

You can create testamentary trusts through a will and take effect upon the death of the settlor. These trusts can be anonymous if the terms of the trust are sensitive or if the settlor is protecting the beneficiaries’ privacy.

Family Trusts

You can create family trusts for the benefit of a family member or group of family members. These trusts can be anonymous if the settlor or the beneficiaries wish to keep their financial affairs private.

Revocable & Irrevocable Trusts

The settlor can amend or revoke a revocable anonymous trust at any time during their lifetime. This means that the settlor has the ability to change the terms of the trust or terminate the trust altogether. We often use revocable anonymous trusts as a way to manage assets during the settlor’s lifetime. However, this still allows the possibility of making changes to the trust in the future.

An irrevocable anonymous trust cannot be amended or revoked once it’s created. This means that the terms of the trust are fixed and cannot be changed, even by the settlor. We often use irrevocable anonymous trusts for long-term asset management or for tax planning purposes.

Both revocable and irrevocable anonymous trusts can be used to protect the privacy of the beneficiaries and the terms of the trust. However, irrevocable trusts may offer greater privacy protection. This is because the settlor cannot change the terms of the trust once they have created it. 

How to Create an Anonymous Trust?

To create an anonymous trust, you will need to follow several steps.

Step 1: Choose a Trustee

The first step in setting up an anonymous trust is to choose a trustee. This person or entity will be responsible for managing the trust and ensuring that It’s administered according to the terms of the trust document.

Step 2: Create the Trust Document

The trust document outlines the terms of the trust. This includes the purpose of the trust, the assets that will be placed in the trust, and the rights and obligations of the trustee and beneficiaries. This legal document should also identify the beneficiaries of the trust, although their identity may be kept confidential if the trust is an anonymous trust.

Step 3: Transfer Ownership of the Assets to the Trust

To create the trust, you will need to transfer ownership of the assets that you want to place in the trust to the trustee. You can do this through a legal instrument called a deed of trust.

Step 4: Register the Trust

Depending on the jurisdiction in which the trust is being created, you may need to register the trust with the relevant government agency. This typically happens to ensure that the trust is legally recognized and can be enforced by the courts.

Make sure to get in touch with a financial advisor or lawyer when setting up an anonymous trust. They can help ensure that you meet all legal requirements and have properly structured the trust. 

Anonymous trusts can be a useful tool for protecting the privacy of the beneficiaries and the terms of the trust. However, they also come with certain limitations and responsibilities that you should carefully consider before setting one up.

How to Protect Your Assets With an Anonymous Trust?

Form an Anonymous Trust

While a series LLC can reduce your liability exposure and limit the potential impact of a lawsuit on your personal assets, it does not prevent lawsuits from happening in the first place. An anonymous trust, on the other hand, can help reduce the probability of a lawsuit occurring.

The likelihood of a lawsuit is based on three factors: legal, factual, and financial. An anonymous trust can address each of these factors. This makes it less likely that anyone will file a lawsuit against your company.

Use Northwest Registered Agent to File an LLC Privately

Add Your Anonymous Trust as a Member of Your LLC

In the United States, it’s possible to list your anonymous trust as a member of your LLC in the articles of incorporation. This can help to protect your company’s assets from legal action by hiding your ownership information from public records.

By listing your company as a member of the anonymous trust, you can shield your assets from potential legal action by making it difficult for plaintiffs to associate the assets with your name. Additionally, anonymous trusts do not have to be filed with the state. This means that it’s more difficult for those seeking to sue you to access your ownership information.

Read our article on how to stay anonymous as a business owner to learn more.

Keep Lawsuits Away With Uncertainty

Many lawyers will take on a case on a contingency basis. This means they will assess the potential payout and size of the case based on the merits presented by the potential plaintiff, and then negotiate their fee accordingly.

If the plaintiff’s lawyer is unable to determine who owns an anonymous LLC with anonymous trust members, they may be less likely to pursue a case that could potentially take years to resolve. This can be an effective deterrent for potential plaintiffs, as they may not want to invest significant time and resources into a case with uncertain prospects for success.

How Can You Use an Anonymous Trust?

There are several ways to use an anonymous trust.

To provide financial support to a spouse or family member: You can use an anonymous trust to provide financial support to a spouse or family member while preserving their privacy. This can be particularly useful in cases where the beneficiary wishes to keep their financial affairs private or where the terms of the trust may be sensitive.

For charitable giving: You can use an anonymous trust to make charitable donations while preserving the settlor’s privacy. This can be particularly useful for individuals who wish to support a cause or organization but do not want to disclose their identity.

To preserve assets for future generations: You can use an anonymous trust to preserve assets for future generations while protecting the privacy of the beneficiaries. This can be particularly useful for individuals who wish to pass on their assets to their children or other heirs. But, they don’t want to disclose the terms of the trust to the public.

To protect the privacy of the beneficiaries: You can use an anonymous trust to protect the privacy of the beneficiaries and the terms of the trust. This can be particularly useful in cases where the terms of the trust may be sensitive or controversial.

It’s important to note that anonymous trusts may be subject to different rules and regulations depending on the jurisdiction in which they’re created. Consult a financial advisor or lawyer who can help you through all these processes.

How Much Does It Cost to Form an Anonymous Trust?

Creating an anonymous trust can cost you between $1,000 to $10,000. It incurs yearly fees, as much as 3 percent of trust assets. The cost of forming an anonymous trust can vary depending on a number of factors. This includes the complexity of the trust, the jurisdiction in which the trust is being created, and the services of the lawyer or financial advisor helping you to set up the trust.

Some of the costs that you may incur when forming an anonymous trust include:

• Legal fees: You may need to pay legal fees to a lawyer or other legal professional. They will help you draft the trust document and ensure that it’s properly structured and legally sound.
• Filing fees: Depending on the jurisdiction in which the trust is being created, you may need to pay filing fees to register the trust with the relevant government agency.
• Professional fees: If you are working with a financial advisor to set up the trust, you may need to pay their fees for their services.
• Asset transfer costs: If you are transferring assets to the trust, you may incur costs for transferring ownership of those assets.

It’s difficult to provide an exact cost for forming an anonymous trust as the costs can vary widely depending on the specific circumstances. It’s advisable to consult a professional to get a better understanding of the costs involved in setting up an anonymous trust and to determine the best course of action for your needs.

Conclusion

An anonymous trust is designed to keep the identities of the settlor, beneficiaries, and the trust’s terms private.

These trusts can serve various purposes, such as providing financial support to a spouse or family member, making charitable donations, preserving assets for future generations, or simply safeguarding the beneficiaries’ privacy.

Several types of anonymous trusts exist, including charitable trusts, spendthrift trusts, testamentary trusts, family trusts, and irrevocable trusts.

To set up an anonymous trust, you’ll need to select a trustee, draft the trust document, transfer assets into the trust, and register it if necessary. Consulting a lawyer or financial advisor is crucial to ensure everything is set up correctly.

While anonymous trusts offer significant privacy benefits, they also come with certain responsibilities and limitations you should consider before moving forward.

To learn more about anonymous businesses, read our articles on the pros and cons of an anonymous LLC. Also, learn how you can create an anonymous LLC in Delaware, Nevada, Wyoming, and New Mexico.