Are you a beneficiary of the trust?
The first question to ask yourself is whether you are a beneficiary of the trust. If you are the trustees are under a duty to disclose certain information about the trust to you. They are not however obliged to disclose everything and sometimes will have a choice about whether they disclose certain information.
Throughout this blog we will refer to the following example to help you understand the different issues that may arise and how they are dealt with:
James died leaving behind a valid will. In his will he leaves £100,000 to be held on trust for his biological children Sam and Jenny. The executor and trustee of his will is his second wife Julia. Julia has her own child Freddie, who is James’ stepchild. All children are adults.
What information should a trustee provide to the beneficiaries?
A trustee should usually notify any adult beneficiary of their interest in a trust. If you believe that you are the beneficiary of a trust but have not heard from the trustees of that trust you should make enquiries to discover if you have an interest. It is important to note that this is not an absolute obligation for trustees and there are some exceptions to the rule.
In our case from above Julia should notify Sam and Jenny of their interests in the trust.
Trust Documents and Accounts
A trustee has the duty of keeping the beneficiaries informed about the trust and actions taken in dealing with trust property. They should ordinarily, if asked, disclose the main trust documents and accounts so that beneficiaries can understand the full extent of the trust and the property within it.
The main trust documents include:
- the trust deed and any supplemental trust deeds (for example deeds of retirement and appointment of trustees and deed(s) of variation).
- details of any appointments/advancements.
- details of property added to the trust.
- explanations about investment of trust property.
- details of the trustees’ dealings with third parties such as legal advisors (unless it refers to how the trustees should exercise their discretion).
Again, beneficiaries do not have an absolute right to this information. The beneficiary may be required to prove that their interest is sufficient to justify disclosure of the documents and may be asked for their reasons for wanting disclosure. Ultimately, a trustee must decide whether disclosing the documents is in the best interests of the beneficiaries and will assist in keeping costs down. If unsure, a trustee may seek the Court’s directions/allow the Court to decide.
In our example, if Sam and Jenny requested disclosure of the trust documents it would be sensible for Julia to grant their request. Sam and Jenny have a strong interest and are the only beneficiaries. If they only had a remainder interest in the trust property or wanted access to the information in order to challenge to validity of the trust Julia may be justified in withholding the information if she felt that this was in the best interests of the trust and beneficiaries.
What if I am obtaining the documents/accounts to challenge the actions of a trustee?
Here the trustee may be unwilling to disclose requested information.
Using our example, if Julia had been distributing trust property to Freddie this should be shown on the trust accounts and potentially in some of the trust documents identified above. If Julia refuses to disclose this information, Sam and Jenny may ask the Court to intervene and order information and documents to be disclosed to them to challenge Julia’s actions.
Am I entitled to see a Letter of Wishes?
A letter of wishes is a letter written by the person creating the trust to the trustee to help guide them in distributing the trust property. It is not a trust document and so a trustee has full discretion of whether to disclose it or not.
If James left a letter of wishes to Julia that she is to distribute a greater proportion of the trust property to Jenny to account for a loan James made to Sam, Julia may follow this request. Sam may be unhappy and request that Julia disclose the letter of wishes, but the starting point would be that Julia is under no obligation to do so. Sam would need to present a good reason for why it is appropriate for the letter to be disclosed beyond the fact that he is just unhappy about it. If unsure, Julia could seek legal advice on whether she should disclose the letter or not, she would not have a duty to disclose this advice as it refers to how she should exercise her discretion.
To summarise there are certain documents/information that a trustee should disclose unless there is a good reason not to. Withholding information that should have been disclosed may mean a trustee is ordered to pay the costs of the other party should the matter go to Court. However, there are other documents, particularly those relating to how a trustee should exercise their discretion, where a Court is less likely to find a trustee has a duty to disclose them. A beneficiary may also have to pay the trustee’s costs should they be unsuccessful in Court.
