People often wish to ensure confidentiality in doing their estate planning as an important goal. A trust is a common vehicle to do so, since court probate processes, which have been around for centuries, are public and once a will is probated it becomes a public document. The current government trend is towards greater disclosure of beneficial ownership, making achieving confidentiality in estate and trust matters much more difficult, if not impossible, in some cases.
Obtaining a court grant of probate (or certificate of appointment of estate trustee with a will in Ontario), which is often required for an executor to be able to administer a person’s assets after his or her death, involves the filing of the deceased person’s last will with the court making it available to the public. In addition, the total value of a person’s assets must be disclosed in the application form, as well as the addresses, and if minor beneficiaries, dates of birth, of all beneficiaries must be provided to the court. While a probate application is not exactly a newspaper article, it is available to anyone who wants to see it and who is willing to bother to take a look at the court file. Now in Ontario a fulsome list of all estate assets subject to probate is required to be filed after the court certificate is issued, although this is not a publicly-available document.
Trusts have traditionally been a means of achieving greater confidentiality, because assets in a trust do not require a probate grant or other court document to be administered on the death of the person setting up the trust or when the trustees who administer the trust are making distributions to beneficiaries. Unless trustees and beneficiaries have a dispute requiring court intervention to resolve, the trust terms and asset information do not form part of the public record and are kept private, although they are subject to legitimate information requests and filings with tax authorities.
This level of confidentiality has been eroded as governments implement more disclosure requirements for estates and trusts (see our blog “The Movement to Transparency and the Erosion of Privacy“). For example, in Ontario, a transfer of land requires that the new owners provide certain information regarding all individuals and entities who will retain or be given an interest in the land but who will not be the registered owners of the land (referred to as “beneficial owners”, as distinguished from “legal owners”). While Ontario’s current beneficial ownership disclosure rules are confined to information-gathering for the Ontario Government only, and are not part of the pubic record, other jurisdictions such as B.C. have implemented beneficial ownership registries which could result in such information being freely publicly available. While the beneficiaries of most trust structures are not disclosed pursuant to the current Ontario rules, this may change in the future.
Taxation is the underlying cause of many of these recent disclosure obligations and registries (anti-money laundering is also an often-cited purpose). Governments either want to find new sources of revenue or to catch the non-compliant who are not paying their “fair share”. Disclosure requirements, coupled with penalties for non-compliance are one means of achieving these goals. And since most if not all governments are more than interested in obtaining further information regarding their non-compliant taxpayers, many are now cooperating on an international level in an unprecedented way. Through bilateral or multilateral agreements or through unilaterally imposed obligations such as the U.S. FATCA regime, governments are obtaining information from other jurisdictions that was previously unavailable to them. Disclosure of beneficial ownership is only the latest of such measures. It won’t be the last; the overarching policy reasons behind these measures make it difficult to argue against them, even if you believe that they may go too far.
Regardless of one’s views on these matters, it is important to seek professional advice and guidance to structure one’s affairs as optimally as possible, and as confidentially as achievable, within the confines of current disclosure obligations.
— O’Sullivan Estate Lawyers