The Life of a Trust Part Five: Requests For Information By Beneficiaries

It is therefore imperative that Trustees are aware of the many factors that they need to take into account and the questions they should ask before taking any decision. They should also understand how the Courts view requests by beneficiaries as this should inform their decision in any case.

In order to avoid problems arising in the first place, Trustees should allow this thinking to inform the usual flow of information to the beneficiaries – ensuring that regular and appropriate disclosure is made according to the particular circumstances of the Trust in question.  

The starting point

The starting point is that a beneficiary has a right to have the Trust administered in accordance with the provisions of the Trust document and the general law. This is the “irreducible core” of the Trustee-beneficiary relationship. In order to hold the Trustee to account, a beneficiary requires information about the Trust.

At the very least, beneficiaries with a vested interest and/or a real prospect of benefit are entitled to know of the existence of the Trust and of the nature of their interest under it.

A legitimate expectation of disclosure

Beyond the right to be informed about the existence and nature of a trust interest however, beneficiaries are not entitled ‘as of right’ to any further information and must make requests for information to the Trustees.

Rather than it being a ‘proprietary right’, a beneficiary’s entitlement to seek disclosure of trust documentation is one aspect of the Court’s inherent jurisdiction to supervise the administration of trusts. Trustees have a fiduciary duty to keep beneficiaries informed and to provide accounts and where this is not done the Court will intervene.

Dealing with a request

Trustees therefore have a discretion – they must take into account all the relevant circumstances and balance the various factors in deciding whether or not to provide the beneficiary with the information requested.

The following is a non-exhaustive list of matters Trustees should consider:

  • What is the status of the beneficiary – do they only have a remote possibility of benefiting? 
  • What is the purpose of the request? For example, will the information be used in proceedings against the Trustee?
  • What documentation/information is being requested?
  • Would disclosure be in the interests of the proper administration of the trust and the beneficiaries as a whole?
  • Is it limited to trust documentation?
  • Are there commercial reasons for not disclosing?
  • Does it concern the Trustee’s decision-making process?
  • Are there confidentiality reasons for not disclosing?
  • Is disclosure impractical or too costly?
  • Is the documentation subject to legal privilege?
  • Has the beneficiary properly justified their request?
  • Does the Trustee require consent to provide the information, for example from a Protector?

Type of documentation sought

Trust documents” – in Re Londonderry’s Settlement [1965] Ch 918, the Court made a distinction between “trust documents” (being disclosable, such as the trust deed, deeds of addition and deeds of appointment) and other documents that disclose the Trustees’ reasons for the exercise of a discretionary power such as minutes of meetings and correspondence (not being disclosable). Whilst this is no longer a hard and fast line (all documents being potentially disclosable under the Court’s jurisdiction to supervise trusts ), the distinction is a useful starting point.

Trust accounts – in addition to trust documents, Trustees should generally be ready to provide the trust accounts within a short time period.

Letter of wishes – usually, a settlor’s letter of wishes will state that it should be considered confidential, and such confidentiality is generally upheld. However there may be circumstances where it should be disclosed if this would serve the interests of the beneficiaries as a whole and the proper administration of the trust.

Legal advice – legal advice paid for by the trust fund is privileged but is held for the benefit of the beneficiaries and therefore it should not necessarily be withheld from the beneficiaries. If the legal advice relates to a claim against the Trustee, the Trustee is not required to disclose the advice. Where it relates to a claim by one beneficiary against the other, it is unlikely that disclosure would be in the interests of the beneficiaries as a whole and could be withheld on this basis. However, where the advice relates to the day to day decision making of the Trustee, the Trustee should consider careful a request for such as set out above.

Company documents – where Trustees hold a controlling shareholding in a company, it is likely that a beneficiary will be entitled to see information about the company as if they were the registered shareholder subject to there being no good reasons against disclosure put forward by other beneficiaries or the company directors and the beneficiaries understanding the confidential nature of the documents.

Protection

There are a number of steps that Trustees can take to reduce the risk in disclosing any documentation – redacting confidential/irrelevant information, releasing the documentation only to the beneficiary’s advisors, obtaining an undertaking of confidentiality and/or obtaining an undertaking limiting its use.

Application to Court

In difficult cases, Trustees may need to seek the Court’s guidance and direction on the request by way of an application for directions under section 61 of the Trustee Act 1961. This will protect the trustees from any later challenge. Provided the Court considers that the Trustee has acted reasonably and with proper motive, the Trustee will be entitled to recover its costs out of the trust fund.

In the final part of the series, we will discuss the termination of a trust.

For further information please contact any of the members of our specialist trust team, Annemarie Hughes; Donna Matthews; Libby Gordon; Tara Cubbon; Kirsten Middleton or Jessica McManus.

The guidance in this note is for information purposes only and is not intended to be exhaustive. It is not intended to constitute legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. DQ shall accept no responsibility for any errors, omissions or misleading statements or for any loss which may arise from reliance on the information in this note.