Trustee Duties To Beneficiaries
Your Duty To Inform & Account
You must inform the beneficiaries of all important events and matters, and keep detailed, straightforward records.
A trustee has a present (right now!) and ongoing duty to provide relevant information about the trust, and a trustee’s actions, to each of the beneficiaries. This also includes a duty to account, on a regular basis, and to otherwise show the beneficiaries the trust’s “books.”
Duties of a trustee are fiduciary duties. These duties are among the most serious, most important and highest duties found in the law. The law and your beneficiaries impose great trust and confidence in you. As such, the law subjects your actions and your conduct to the closest scrutiny. If you believe that such close scrutiny is any way unfair or unnecessary, then being a trustee is not for you. In that case, you should not accept a trusteeship, and if you are currently serving as trustee, you should resign.
Many view a trustee’s role as merely, or, more or less limited to, purchasing and selling stocks and bonds. But in actuality, a trustee’s role is considerably greater and more encompassing than just prudent investing. Managing money, determining what asset classes to have in a trust’s portfolio, is merely one part of the responsibilities of serving as trustee. One of the most important duties that a trustee has is to provide relevant information to each of the beneficiaries. The beneficiaries have an absolute right to know exactly and everything that is going on in their trust. It is your responsibility, and duty, as trustee, to keep them apprised of all aspects of trust administration.
What Is Relevant Information?
Relevant information has been described as any so-called reasonable or everyday information which one would expect or want to know about the trust, its assets, and its administration.
A more cynical view would define relevant information to include all information about the trust, specifically including any information which the trustee doesn’t want to share with the beneficiaries, or which he thinks the beneficiaries do not need to know. After all, as the saying goes, if you have to wonder whether you need to disclose that information, you better disclose. In general, the trustee is required to disclose:
The identity and location of all assets. Fair market value of all assets as of a particular time, perhaps the carrying value or the cost basis or purchase price of the assets . Expenditures, including disbursements for costs and expenses, including money paid for trustee compensation and trust attorneys, and other advisors. Value of all trust funds distributed to each beneficiary including the identity of each asset distributed. Transactions and occurrences, including income and gains and losses.
The duty to disclose relevant information is very closely linked to a trustee’s duty to provide accountings on a regular basis. But they are slightly different. Both duties are ongoing, but the duty to account is considered more periodic. The duty to provide an accounting is intended to give the beneficiaries a regular “snapshot” of the trust’s books on a regular basis. So, typically annually, you provide each beneficiary with an accounting, in essence, a more or less formal QuickBooks spreadsheet of all the ins and outs of the trust’s money. With proper tracking, and financial software, you or a bookkeeper can easily maintain the data which needs to be reflected in the accounting. Each jurisdiction has different rules on when accountings must be filed, how often they must be filed, exactly what data must be provided, and whether or not they need to be filed with a court of law.
The duty to provide relevant information is also ongoing, but is typically satisfied as the inquiry or need arises. A simple ex ample would be if a beneficiary calls, or sends an email, inquiring about the lease terms of a piece of real property which the trust owns. Conceivably the answer to the beneficiary’s inquiry might be revealed on an annual accounting which would be produced next year. But why make the beneficiary wait? Well, candidly, there is no need to make the beneficiary wait.
You, as trustee, should be responsive to such basic and sensible inquiries, and you clearly have a duty to disclose such information. It would be unreasonable and in bad faith to make a beneficiary wait months for a simple answer that can be provided right now. If a trust owns real property which is rented, why not provide the terms and conditions and a copy of the lease? You could make this information available by way of a trust disclosure document which we discussed in the last chapter.