Trustees’ duty to give information to beneficiaries
It can be flattering to be asked by a relative or close friend to be a trustee of their estate, but this is a role with important legal obligations and disputes can arise when beneficiaries do not agree with the actions of trustees. One such area of potential disagreement is the amount of information that is circulated to beneficiaries.
Iwona Durlak, wills, trusts and estate planning solicitor with IMD Solicitors with offices in London, Manchester and Birmingham explains that ‘trustees have a duty to account to the beneficiaries and to provide information about the trust to them. These are vital tools in the beneficiaries’ armoury when holding trustees to account, and this can be important if there is any suspicion that trustees are acting improperly.’
A trust may be set up to protect money or property while it continues to benefit certain people (the beneficiaries). For example, a trust of property may be available for named adult children to live in, or a trust fund may pay for the beneficiaries’ university fees. The fund or property is managed by the trustees who must administer the trust in accordance with clear legal principles.
Each trustee owes specific duties towards the beneficiaries including the duty of good faith, to act in accordance with the trust deed and they have an obligation to account to the beneficiaries for their stewardship of trust assets.
Keeping beneficiaries informed
In discharging these legal responsibilities, as a trustee you have an important duty to keep the beneficiaries informed.
The trustees must keep accounts and provide them to the beneficiaries if they ask for them, give them reasonable information about the investment and management of the trust fund and inform a beneficiary when they become entitled under the trust.
Information requests from beneficiaries
Conversely, the beneficiaries are entitled to request information to reassure them that the trust is being properly administered. However, the beneficiaries’ entitlement to information from the trustees is not unfettered and trustees do not have to comply with every request for details and information of the beneficiaries. They must have genuine reasons for seeking disclosure of information, such as holding the trustees to account or to protect their own beneficial interests.
In a recent case, Lewis and others v Tamplin, the beneficiaries made numerous requests to the trustees for information about the trust as they believed that distributions of trust money had been made to other beneficiaries but not to them.
The trustees refused to respond on the basis that the beneficiaries had enough information. However, the court decided that the beneficiaries had the right to disclosure as they wanted the information to hold the trustees to account – and that was a valid reason.
While the court said that the beneficiaries were entitled to disclosure of documents relating to advice sought by the trustees in relation to the trust itself and for the benefit of the trust and the beneficiaries, they were not entitled to see documents that were protected by legal professional privilege of the trustees in any other capacity. Nor can beneficiaries require the trustees to disclose information or documents to hold them account specifically for their management decisions.
Beneficiaries do not have the right to see everything, so how should you respond to a request from a beneficiary for additional information? You should consider, for example, whether they have valid reasons to see the information, if it is reasonable to supply the information requested and whether it is privileged so that they do not have the right to see it.
When information is not provided
The law allows beneficiaries to ask the court to uphold their rights by making the trustees accountable. This means if you refuse a request for information from beneficiaries, they may ask the court to order disclosure of the information. The court will not simply accept an argument that the beneficiaries already have enough information, there must be good reason in law why disclosure should be refused.
As a trustee, you need to consider requests for information and documents from beneficiaries carefully. If you are inclined to refuse a request it must be for a proper reason, otherwise there is a risk of a legal dispute.