What information is a trustee obliged to provide to beneficiaries about the running of the trust and what is the risk of ignoring requests from beneficiaries?
The relationship between trustees and beneficiaries is carefully balanced; more often than not things run smoothly. However, what if things go wrong? Beneficiaries must be able to hold trustees to account, but it is hard, if not impossible, to do this if the beneficiary has no information about what the trustee is required to do and/or what the trustee actually does. The key issues, therefore, are how can a beneficiary find out what the trustee has been doing and what is the trustee obliged to tell a beneficiary?
Can a trustee ignore a request for information?
Information requests from beneficiaries can be completely innocent. Frequently however they are the result of a disgruntled beneficiary seeking specific information to understand and ultimately challenge the way a trust has been administered.
These requests, particularly if made from a principal beneficiary, should not be ignored. Doing so risks breaching a trustee's fiduciary duty to keep a beneficiary informed and to render accounts. A trustee who buries his/her head in the sand when a request is made may be prevented from relying on indemnity provisions or recovering costs if the disgruntled beneficiary resorts to litigation to obtain the requested information.
What does this duty to account actually mean in practice?
Is a trustee obliged to treat all requests equally, regardless of the class of beneficiary making the request? Here are a few basic principles which trustees should apply to any request for information:
- When asked to disclose trust accounts, a trustee is expected to provide beneficiaries with information about the running of the trust and account for what he/she has done with the trust assets. There is no set format for providing this information, it can be verbal or written whether by financial statements or email updates.
- While a trustee has a duty to provide information to beneficiaries, he/she is not required to provide everything requested just because it has been asked for.
- A trustee is entitled to think twice if the request is from a remote beneficiary or if there are concerns as to how the beneficiary might use the information. In these circumstances, if a trustee feels the information may be misused, the circumstances of the request should be explored further.
- A trustee should consider whether a confidentiality agreement is necessary. If wider disclosure of the accounts could be contrary to the interests of the beneficiaries as a whole, it may be worth restricting the circulation of the information or its use in other proceedings.
- When deciding what to disclose, it is not a case of one size fits all; as made clear in RNLI and others v Headley and McCole (2016) different classes of beneficiaries are entitled to see different things. Here the court determined that a trustee is only obliged to provide the information needed by that particular beneficiary to appreciate his/her own rights against the trustee in respect of the administration of the trust; it is not necessary to go beyond this.