Trust beneficiaries frequently ask what trust documents trustees are obliged to disclose to them.
In this article, I am only dealing with common trust situations without taking into account any special or compelling reasons why information should or should not be disclosed.
There are some trusts that have information-controlling mechanisms embedded in the trust deed that only permit the trustee to disclose trust information to a protector or to the beneficiaries with the protector's consent; this article does not consider such specialised trusts.
The overriding principle of law governing the disclosure of trust documents is the fundamental requirement that trustees should be accountable to the beneficiaries in order to ensure the proper administration of the trust -- and the beneficiaries must be sufficiently informed in order to do so.
For this reason, the courts usually lean towards ordering trustees to disclose information to beneficiaries unless there are good reasons not to.
There are several trust documents that should be disclosed to beneficiaries, including:
- Full and accurate trust accounts including details of distributions made to beneficiaries, but not the trustees' reasons for doing so;
- Statements of trust investments and documents relating to trust property;
- Documents relating to trustees' fees and expenses;
- The trust and supplemental deeds;
- Documents relating to the appointment and/or retirement of trustees, including changes to the structure of the trust;
- Correspondence between trustees and their legal advisors relating to the general way in which the trustees are required by law to exercise their discretion, but not the reason for the exercise of their discretion. This will include, for example, opinions paid for by the trustees out of the trust fund providing legal advice to the trustees;
- Minutes of trustees' meetings, except any parts relating to the reasons for the exercise of a trustee's discretion;
- Trust documents created by a trustee, where any confidentiality in the documents is vested in the trustee himself (e.g. a trustee's private notes) and held by the trustees for the benefit of the beneficiaries;
- Where the trustees are in partnership with third parties (when acting in their capacities as trustees), the partnership agreement and the partnership accounts; and
- Information that will assist beneficiaries in completing their tax returns.
There are also trust documents that are not normally disclosed to beneficiaries, including:
- Documents relating to the day-to-day administration of a company in which the trustees are shareholders and/or directors (there are exceptions);
- Documents obtained by trustees from a third party where a duty of confidentiality to the third party exists, unless the third party consents to the disclosure;
- Where the trustees are in partnership with third parties, any information concerning the day-to-day running of the partnership;
- Agendas of trust meetings;
- Counsel's opinion obtained by trustees on learning that a beneficiary is instituting proceedings against the trustees. Also, counsel's opinion that has led the trustees to decline a request for information from a beneficiary, because to do so would reveal their reasons for making that decision.
- Letters or memoranda of wishes. The courts have refused the
disclosure of letters setting out the settlor's wishes,
primarily on two grounds:
- First, because it was a confidential document, which has to remain so as a result of a duty owed by the trustees to the settlor; and
- Second, because the letter of wishes was a document that was likely to be material to the exercise by the trustees of any power of discretion.
- Documents concerning the reasons for the exercise of the trustees' discretion, which include reasons for a change in trust policy relating to trust administration; and
- Information on dealings with other beneficiaries in which the enquiring beneficiary has no interest.
The current ruling of Bermuda's highest court is that no beneficiary is entitled to trust information 'as of right', without first considering the facts of each particular case as there may be compelling reasons against disclosure.
The foregoing examples of what trust documents are or are not disclosable, should always be looked at through the prism of our highest court's ruling.
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.