Protecting Clients’ Privacy

Protecting Clients’ Privacy

Three simple ways advisors can help with this effort

With so much in the news recently about the tragic death of actor Robin Williams, there were several reports about the content of his estate plan and specific terms in trusts he created for his family. TMZ initially reported on a 2009 trust that allegedly contained testamentary provisions. Williams’ publicist then told Investment News that the document TMZ referenced was an old insurance trust that wasn’t part of the actor’s plan at his death. Apparently the trust had become public some years back when it was involved in litigation. But the fact that news outlets were able to get their hands on any of Williams’ estate planning instruments, let alone ones that were unfunded or otherwise superseded, reminds us all of the importance of protecting our clients’ privacy during the estate planning and administration process.

There are a few simple ways in which all members of the advisor team can help with this effort.

 

Keep Unnecessary Personal Info Out of Governing Instrument

First, drafters shouldn’t include any more personal information in the governing instrument than is necessary. I can’t help but cringe when I see a trust with a family identification article for a client who values privacy. The advisors who work closely with the family will already know the identity of the settlor’s spouse and children, and it’s nobody else’s business. I have even seen older identification articles disclose the family members’ birthdates and social security numbers. While including this type of information may facilitate a custodian or banker’s administration of the trust at some point in the future, surely such information shouldn’t be in the instrument itself.

 

Don’t Circulate Testamentary Provisions

Second, don’t circulate copies of a settlor’s testamentary provisions during the settlor’s life. The settlor’s will or full revocable trust instrument needn’t be held on file with custodians or parties other than the estate lawyer, an acting trustee of an irrevocable trust and the primary advisor. In most cases, a certification of trust or redacted copy of the trust instrument will be sufficient for any third parties interacting with the trust. I’ve even seen situations in which, because the instrument granted powers of appointment that could result in changes to the testamentary provisions, the acting trustee of a funded irrevocable trust was given only a redacted copy of the instrument to preserve privacy in case the testamentary terms were changed by exercise of the power. Circulating full copies of a plan that can be changed just invites conflict if beneficiaries are later disappointed by any changes that are made.

 

Use Caution in Transmitting Estate-Planning Instruments

Third and finally, be cautious in how copies of the estate-planning instruments or information about them are transmitted and communicated. At my current firm, we store copies of the governing instruments in our clients’ private, secure web portals that can be accessed only by us or by the clients from home.  This avoids the need to send the documents in hard copy or electronically. When I was in private practice, without the benefit of a secure web portal, my preference was to send clients only one hard copy of each executed instrument in a binder that could be kept in their personal safe or vault. When requested, I would send pdfs (typically redacted pdfs) by email --preferably with the attachments password protected-- or on a disk/usb flash drive. Generally, email is unsafe unless you’re communicating within a secured system or from one private network to another. Urging clients to set up a virtual private network may add some layers of protection. My concern with sending electronic copies on disks is that technology preferences evolve so quickly that the mode of storage is likely to be difficult to access when the documents are needed in the future. The floppy disks we sent clients in the late 1990s are now useless, and it probably won’t be long before CD-ROMs follow suit.  Moreover, sending electronic copies of the documents increases the risk that they may fall into the wrong hands.

What are some of the biggest mistakes you have seen that risk violating a client’s privacy, and what steps do you take to protect your clients’ privacy?

 

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