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
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
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
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-ŕ-vis beneficiaries is
analogous to that of bankers vis-ŕ-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.
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