It’s all about THE record.

Everyone knows that estate planning is essential if you want to assure that your intent will be honored. As it stands today, the most recent notarized document carries the most weight in court. So how can you make sure you have THE most recent document. It might not be the one you have at home in your safe, or is uploaded to a digital vault, or has been  handed to your heirs. We have all heard the horror stories that make the news of trust amendments surfacing like curve balls at the end of life. 

Let’s start with the basics. 

What is a trust?

The IRS gives us a great definition for a trust: a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another.

The person(s) who owned the property pre-trust, and who gets to set the rules of the trust relationship, is referred to as the “trustor,” “grantor,” or “settlor.” The settlor’s property that is contributed to the trust relationship is referred to by attorneys as the “trust estate” or “corpus” (latin for “body”); in everyday conversation, this is the “trust fund.” The person who holds on to and manages the trust fund is the “trustee.” And, the person the trust fund is intended to benefit is the “beneficiary.”

Not all trust data is equal.

Most trusts in America begin as inter vivos (latin for “among the living”) trusts, and are meant to both distribute the settlor’s property after the settlor’s death and provide incapacity planning during the settlor’s life. So, when these trusts get started, the settlor, trustee, and beneficiary are all the same person. The goal of the trust documents is to define the trust estate and govern the relationships between the trustee and the trust estate, the trustee and the beneficiary, and the trustee and third parties. And, for each of these, different people are entitled to different information at different times. 

So, for example, a financial institution is entitled to transparency as to who the current trustee is and what the trustee’s powers are, but has no need or right to know about future beneficiaries. And, while someone who has been identified as a successor trustee may not need to know now about beneficiaries, they do need to know that they are the successor and the conditions under which they need to take action, and they will need to know about everything, just as soon as they become the trustee.

Conventional legal documents are the old way to store trust data.

For centuries, trust data has been stored in various conventional legal documents—usually a trust agreement or declaration of trust followed by amendments. Other data relevant to the trust relationship are memorialized in various other conventional legal documents, such as death certificates, doctor letters, affidavits, and deeds. 

These trust and legal documents store data in legalese, the formal and technical language of legal documents that is hard to understand, they require translation. Every time that data is written into or accessed from conventional legal documents, that data must first be translated into or out of legalese. This takes time–costing money–and results in mistakes–leading to litigation and liability.

And, until recently, the best a settlor could do was to keep all of these documents together, in a location that has some combination of security and accessibility. The industry standard remains putting all your conventional documents in a binder on a bookshelf and saving scans of the various documents to a thumb drive or personal cloud account. 

This conventional storage  approach is insufficient for several reasons:

• Loss.
  Life happens.  Things get lost, misplaced, or lost to fire or flood. All too often, the plan that a settlor spent time and money to prepare goes entirely unused due to simple loss. And so, every day, bar associations across the country are contacted by heirs and beneficiaries looking for missing conventional documents.
• Security.
  We want our trust data to be secure. Unfortunately, the only way to secure conventional legal documents is to put them somewhere that is inaccessible to others (for example: safe, lock box, online digital password-protected vault).
• Accessibility.
  But, in order to accomplish the purposes of a trust, our trust data needs to be accessible to the right people at the right time.
• Authentication.
  Conventional legal documents are authenticated by what is defined as  “wet” signatures (a signature in ink on a piece of paper) and notary stamps. And, centuries ago, before everyone could write, let alone own personal laser printers, scanners, or 3-D printers, that was sufficient. It is not anymore. 

Today, all conventional legal documents are at risk of fraud and forgery. Even digital files with the right kind of software, can be manipulated and re-uploaded opening up those documents to malicious intent.  

So, the very documents that are supposed to protect us end up exposing us. 

And, knowing this, financial institutions dealing with these documents spend billions in man hours and legal fees trying, imperfectly, to authenticate these documents as best they can. And, if they are unable to for whatever reason, they simply reject the document.

Digital trust registration is the future of trust data management.

Today, we have replaced most of our conventional systems with digital alternatives, to great effect. From stock certificates to DTCC records, paper tickets to QR codes and apps on your phone, and cold hard cash to mobile payments option, digital options provide a secure way to manage data efficiently with oversight in the modern world. 

Applying the same digital principles to trust data produces the same positive effects.

• Registered. Digital allows for immutable record keeping 

• Secure. Digital allows for encryption and data security

• Accessible. Digital allows for a permission based access structure

• Authentic. Digital allows for data authentication upon receipt of data

• Control. Digital allows for intentions to be executed

This is where a digital registry sets the new standard for legal record keeping. Unlike traditional digital vaults, a digital registry closes the loop between document storage and digital data authentication. All records are authenticated during the upload process creating an immutable trail of evidence admissible in court. 

Stepping into the world of digital trust registration

In a world where estate planning is paramount, ensuring the authenticity and accessibility of your legal documents is crucial. The conventional approach to storing trust data is no longer adequate, leaving documents susceptible to loss, insecurity, and accessibility challenges. It’s time to embrace the future of trust data management by transitioning to a digital registry, you have already made the step from analog to digital in all other aspects of your life.  You need to approach your trust and estate planning with the same mindset.

The article was written by Adam Eberts, Corporate Counsel –  illuminote