Financial advisors should know that silent trusts frequently do not remain silent for very long, says Adrienne M. Penta, senior vice president of wealth management at Brown Brothers Harriman, an investment bank and securities firm.

“Silent trusts should be used sparingly and they should not require that they remain hidden for long time periods,” she says. “Silent trusts tend to become noisy after a while.”

Silent trusts, in which the beneficiaries are not immediately told about the trust, are planning tools frequently used in estate planning. Although silent trusts can be useful, advisors should be aware of their downsides, Penta says.

There can be many reasons for not telling beneficiaries about a pending windfall. The beneficiary may be too young to appreciate the wealth or may not be responsibile enough to handle the money. The person establishing the trust, usually a parent or grandparent, may want the beneficiary to finish school and establish a career before inheriting, Penta says.

Whatever the reason, the financial advisor should know the client well enough to understand his or her reasoning. In addition, the trustee, grantor, attorney and advisor should discuss the options together.

A person setting up a silent trust needs to take practical matters into consideration, Penta says. If one child is given access to the trust before others, for instance, the secret is probably going to get out.

The trustee who controls the trust also can be in an awkward position. He is required to keep the trust a secret, which may mean he has little interaction with the beneficiaries. Because of that, he will not know if a beneficiary is irresponsible or in real need of the money before the distribution.

All of these factors must be taken into consideration when a silent trust is established to assure it serves the purpose the grantor desired, she adds.

Trustees do not like administering a trust for many years in silence, she says. Having regular communication with the beneficiaries can help assure the trust is used for the purposes the grantor wanted. Operating in silence sometimes thwarts those purposes, she says.

“There are a lot of issues to consider when setting up a silent trust. It is different for every family. An advisor has to know the client well and understand the family dynamics to set up a silent trust successfully,” Penta says.