If you are the beneficiary of a trust, it is imperative that you have access to certain information regarding the Trust assets. Trustees have a duty to beneficiaries to disclose certain information; however, simply because you are a beneficiary, you cannot demand access to all the information regarding a trust.

This article discusses what information a beneficiary of a trust is entitled to and also the rights of a trustee when material is being requested.

As a general rule, a beneficiary is entitled to a copy of the trust document, any deeds of variation of the trust, deeds of appointment and trust accounts. If further information is requested, it is at the discretion of the trustee as to whether it will be provided. How this discretion should be exercised is discussed further on.

What is a trust?

A Trust involves a person or a company (a settlor) putting money or assets into a legal entity to be controlled by trustees according to the directions of the settlor for the benefit of specific individuals (called beneficiaries). 

The settlor will have a trust deed drawn up, which will set out how the trust is to operate.

For a trust to be valid, three certainties must be present:

  1. Certainty of the intention to create a trust.
  2. Certainty as to what property will be transferred into the trust.
  3. Certainty as to who the beneficiaries of the trust will be.

Can a trustee also be a beneficiary?

In principle, there is nothing that prevents a beneficiary from being a trustee.  However, certain factors may limit this from occurring. For example, the trust deed may state that neither the settlor nor a beneficiary can become a trustee.

If a trustee is also a beneficiary, there is potential for a conflict of interest.  However, it is commonplace for adult children to be beneficiaries and trustees, especially in relation to a trust set up by a Will.

If a trust is being set up with trustees (or some of the trustees) and beneficiaries comprising of the same people, it is worth considering appointing an independent person as an additional trustee to minimise the risk of disputes arising from conflicts of interests.

What rights does a beneficiary have regarding requests for trust information?

It is the basic right of a beneficiary to have a trust administered in accordance with the provisions of the trust document and general law.

The case of Schmidt v Rosewood Trust Ltd (Isle of Man) [2003] UKPC 26) set out the following principles when it comes to a beneficiary’s right to information regarding a trust:

  • A beneficiary’s rights to information are based on the fiduciary duty of the trustees to keep the beneficiaries informed and to provide accounts, rather than on any equitable proprietary right.
  • Although beneficiaries have a legitimate expectation of disclosure, they are not entitled to disclosure as a matter of right.
  • A beneficiary must provide evidence that their prospect of benefiting under the trust is sufficient to justify the disclosure of information they are requesting.
  • If a trustee decides not to disclose information and the Court rules they were wrong to do so, the trustee is at risk of an adverse costs order.

What are the trustees’ rights and obligations?

Since the decision in Schmidt, the Court will normally order a document to be disclosed to a beneficiary if disclosure will be "conducive to the proper administration of the trust".

To evaluate whether this will be the case, a trustee needs to consider:

  • The nature of the beneficiary's interest
  • The information being requested and the reason for the request
  • Is the material commercially sensitive?

A trustee can refuse to provide the information if there is a legal reason to refuse, the material is confidential, the information is to be used for the wrong purposes, i.e. challenging the validity of the trust, or it is too impractical or expensive to provide the information. 

It may be possible to disclose part of the document. If this is the case, the trustee should consider this carefully. Taking legal advice on this issue is imperative, as an adverse cost order, should the Court holds that the material should have been disclosed, can run into tens of thousands of pounds.

If you require detailed legal advice regarding trusts, please call us on 0161 941 4000.