Leaving money to a secret beneficiary is very tricky
TORONTO — When it comes to requests to have inheritance money left discreetly, Toronto estate lawyer Ed Olkovich says it’s typically not the racy stuff most people might expect, such as funds for a secret lover or a child out of wedlock.
Rather, he says, it’s often done to avoid having something that could appear unseemly included in a will — which becomes a public document once it’s probated.
“I’ve had a strange case where somebody said to me, ‘Don’t put that person’s name in the will because my partner will go crazy if I left this person money,’” Olkovich says, citing the example of a client wanting to leave a sizable gift to a loyal employee without raising any suspicions from his wife.
“The next thing you know, somebody is accusing them of having an affair.”
But regardless of why you may want to leave money for a secret beneficiary, there are lawful ways to do it, says Ottawa-based estate lawyer Norman Bowley.
One option is to make arrangements with a trust company that administer the money either during your lifetime or after your death.
“They’re discreet and professional and you would literally put in the trust, ‘When I die you are to give this $100,000 to such-and-such-aperson,’” says Bowley. “That is not going to get out in the public, provided that you take the care to use an instrument for which you don’t need probate.”
Another option for leaving money confidentially is a secret trust in which you leave assets to a person named in your will with pre-arranged instructions that they privately give the funds to someone who has not been named in the will.
For instance, Bowley says, you could leave money to a sibling, with the understanding that they would give the funds to your secret beneficiary — “a mistress, for instance.” That means the gift is secret even after the will becomes public.
However, enforceability of a secret trust may be a concern because there is little you could do to ensure your wishes are actually carried out. Bowley says that “if your brother turns out to be a scalawag after your death, he may just keep the money for himself.”
Another option is a permanent insurance policy that guarantees a payment, says Lorne Marr of LSM Insurance in Markham, Ont.