If you are a beneficiary of a trust, are you entitled to an accounting of the assets of the Trust and the activities of the Trustee? Are you entitled to know what assets are in the trust, how the assets are invested, what is being distributed out of the trust, and the amount of fees the Trustee receives? The law of trusts has long answered those questions with a resounding “yes.”
THE DUTY TO ACCOUNT TO BENEFICIARIES IS FIRMLY ENTRENCHED IN TRUST LAW
The duty to keep the beneficiaries reasonably informed of the administration of the trust is a fundamental duty of a trustee.
In one of the first cases dealing with a trustee’s duty to account to beneficiaries, Lord Chancellor Eldon in Walker v. Symonds, decided in 1818, explained that “it is the duty of trustees to afford to [the beneficiaries] accurate information of the disposition of the trust-fund; all the information of which they are, or ought to be, in possession: a trustee may involve himself in serious difficulty, by want of the information which it was his duty to obtain.” Later in the 19th century, United States Supreme Court Justice Joseph Story noted that “it is the duty of the trustee . . . to afford accurate information to the [beneficiary] . . . of the disposition of the trust property; and if he has not all the proper information, to seek for it, and if practicable, to obtain it.” Commentaries on Equity Jurisprudence, As Administered in England and America § 1275 (Arno Press 1972) (1836).
The duty to inform and account to beneficiaries of a trust is so embedded in trust law that “the Restatement of Trusts acknowledges the duty to inform, which is echoed in the Restatement (Second) of Trusts [“the beneficiary is always entitled to such information as is reasonably necessary to enable him to enforce his rights under the trust or to prevent or redress a breach of trust”] and the Restatement (Third) of Trusts [“beneficiaries are entitled to information needed to enforce their interests.”]” Further, the duty to inform is found in the Uniform Trust Code (“The duty to keep the beneficiaries reasonably informed of the administration of the trust is a fundamental duty of a trustee”) and has been included in the Uniform Probate Code since its inception. A trustee’s duty to keep the beneficiaries informed of a trust’s administration is well-recognized in American law and continues to develop.” Phillip J. Ruce, The Trustee and the Remainderman: The Trustee’s Duty to Inform, 46 Real Prop., Tr. & Est. L. J. 173, 179 (2011).
WHY DO TRUSTEES HAVE TO ACCOUNT TO BENEFICIARIES?
The duty to inform is necessary for beneficiaries to protect their interests in trust assets and to ensure that trustees are doing their job.
Why are Trustees required to account to trust beneficiaries? As Phillip J. Ruce explains in The Trustee and the Remainderman: The Trustee’s Duty to Inform, “how can a beneficiary monitor the actions of a trustee to ensure the trustee is acting in the beneficiary’s interests when the beneficiary has no idea that there is anything to monitor?” “The duty to inform is necessary for beneficiaries to protect their interests in trust assets and to ensure that trustees are doing their job. Monitoring of a trustee’s actions by the beneficiaries is important because often the interests of beneficiaries and those of the trustee are not aligned. Trustees performing their fiduciary duties in a manner that is transparent and observable allows beneficiaries to keep an eye on their property interests. Providing beneficiaries with the opportunity to observe the administration of trusts also helps trustees avoid liability that may be associated with doing business in the dark.”
WHAT INFORMATION SHOULD THE BENEFICIARY RECEIVE FROM THE TRUSTEE?
At least annually, a beneficiary should receive a report or accounting from the trustee which details the assets and the liabilities of the trust, all receipts and disbursements, including the amount of the trustee’s compensation, and a list of trust assets with their respective market values as of the date of the statement. The trustee should also provide to the beneficiaries of the trust a copy of the trust instrument itself.
A trustee has a duty to report and account to the trust beneficiaries. If you are a trust beneficiary, you have a right to information about the trust, your interest in the trust, and the various assets of the trust and how they are being administered, invested and distributed. If your trustee refuses to provide this basic information about the trust, the law provides a procedure for you to enforce your rights through a court action requiring the trustee to account.