Information is, of course, crucial to everything we do. It also has a value – witness the burgeoning (and criminal) market in identity theft. This is particularly true in relation to personal financial information where society currently finds itself torn between two competing principles. On the one hand governments want transparency in relation to these matters so that they can tax consistently and make it difficult for people or corporations to avoid or evade their fiscal responsibilities. On the other hand, these same governments acknowledge rights to privacy and confidentiality, which are often enshrined in data protection legislation or (in some jurisdictions) specific bank secrecy rules.
How do professional trustees fit in to this framework? They hold a great deal of information after all, including the existence or otherwise of a particular trust, the terms of that trust, the assets and financial records of that trust and, ultimately, the personal details of the beneficiaries of that trust. They frequently find themselves in a position where they are being asked by other persons to disclose some or all of that information. They may even find themselves in a position where they positively want to disclose certain information, but are unsure of their ability to do so. What are the applicable rules? Three common questions which crop up are:
SHOULD A TRUSTEE TELL A BENEFICIARY THAT HE OR SHE IS A BENEFICIARY?
Beneficiaries of a discretionary trust often do not know that they are the beneficiaries of that trust (or even whether or not the trust in question exists). Is the trustee obliged to tell them? The principle here is that a trust must be capable of being enforced, and the only people in a position to enforce a trust are its beneficiaries. It follows that the beneficiaries must know of the trust (and their status under it) in order to make sure that the trustees are administering the trust correctly. It follows that a trustee is, generally, under a duty to ensure that adult beneficiaries of full capacity are (i) aware of the existence of the trust and (ii) of their interest in it.
SHOULD A TRUSTEE GIVE INFORMATION TO THE SETTLOR?
Clearly, if the settlor of a trust is also a beneficiary, then he is entitled to the same information that any other beneficiary is entitled to (i.e. enough to enforce the terms of the trust, which will generally include the trust deed and the accounts of the trust). Otherwise, it is possible that the terms of the trust may include obligations on the trustees to provide the settlor with information. If there are no such express terms (and if the settlor is not a beneficiary) then the settlor has no more right to information about the trust and its assets than any other stranger to the trust.
DOES A TRUSTEE OWE A DUTY OF CONFIDENTIALITY TO BENEFICIARIES?
The law is less clear on this question, but a recently decided case in the Guernsey Court of Appeal (In Re B 35/2012) suggests that the position of trustees vis-à-vis beneficiaries is analogous to that of bankers vis-à-vis their customers – i.e. that a general duty of confidentiality exists subject to a number of exceptions. This is important because it gives beneficiaries a right to sue trustees should the trustees disclose information about the trust, its assets or the beneficiaries themselves to third parties (such as tax authorities) which then results in loss to the beneficiaries or to the value of the trust fund. As noted however, the duty of confidentiality is not absolute. The Guernsey Court of Appeal took the view that a duty of confidentiality to beneficiaries did not apply where (i) the disclosure in question was required by relevant law, (ii) the disclosure is made with the express or implied consent of the beneficiaries, (iii) the disclosure is in the public interest or (iv) the interests of the trustee require the disclosure to be made. The latter was very much the case in In Re B, where the trustee was facing prosecution on money laundering and tax evasion charges in France in the event that it did not disclose trust information to a French court.
To summarise, information held by trustees is a valuable commodity and should not be lightly disseminated. The potential consequences of wrongful disclosure are significant. When faced with a request to share information a professional trustee must determine the applicable limits of its powers and obligations before doing so.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.