The Trust Beneficiary's Right of Access to Information.

• Author: Palmisano, Jason S.

Oftentimes, a trustee's refusal to provide beneficiaries with information related to the administration of a trust leads to consternation among the beneficiaries. A beneficiary has the legal right to know certain information about his or her beneficial interest in the trust and the assets held by the trust. When information is not provided by the trustee, beneficiaries often assume the worst about the fiduciary's administration of the trust, and significant legal fees can quickly begin to accrue. A trustee may not necessarily refuse to provide information to a beneficiary, rather, the trustee may be ignorant of his or her responsibilities to the beneficiaries. For example, clients regularly select a family relative to serve as a successor trustee of the client's trust. However, a relative usually has little or no experience in serving as a trustee of a trust. Unfortunately, it will likely be the blind leading the blind in the administration of the trust until competent legal counsel is retained. This could leave beneficiaries frustrated and cause them to hire legal counsel just to sort out the basics of a trust administration.

Other times, however, a trustee and beneficiary may both be represented by competent legal counsel and a trustee may refuse to provide information the beneficiary has requested. The beneficiary may believe the information is important to determine his or her interest in the trust or the information may be helpful in determining if the trustee has breached his or her fiduciary duty in administering the trust. In some circumstances the beneficiary has become so jaded and upset they may want to challenge the validity of the trust itself.

This article provides a summary of the information a beneficiary is entitled to receive under the Florida Statutes, as well as how a beneficiary may be able to obtain estate tax returns and gift tax returns, as well as any related information, directly from the Internal Revenue Service (IRS), and a multi-state discussion of the ability of a beneficiary to compel the trustee to provide information when the governing document contains an in terrorem clause.

The Beneficiary's Access to Trust Information and the Trustee's Duty to Furnish

F.S. Ch. 736 contains the Florida Trust Code, which sets forth the duties and powers of the trustee, and the corresponding rights of the beneficiaries to receive access to information. A brief summation of those duties and rights follows. A trustee must administer a trust in good faith, and solely in the interests of the beneficiaries. (1) Much has been written on, and litigated, regarding the bounds of the duty of loyalty, but this duty is not the topic for today. As such, the duty of loyalty should be kept in mind while considering the furnishing and access to information, and preparation of that information. The trustee must exercise reasonable care, skill, and caution in administering the trust as a prudent person would. (2)

The trustee must keep accurate records of the trust property and provide accurate information and accounting concerning the property. In keeping the beneficiaries reasonably informed, the trustee must:

1) Give notice to the qualified beneficiaries (3) within 60 days of acceptance, of the fact of the acceptance of the trust, the full name and address of the trustee, and that the fiduciary lawyer-client privilege applies with respect to the trustee and his attorney (4);

2) Give notice to the qualified beneficiaries within 60 days of the creation of an irrevocable trust or the date a formerly revocable trust has become irrevocable, (5) of the trust's existence, the identity of the settlor, the right to request a copy of the trust instrument, the right to accountings, and that the fiduciary lawyer-client privilege applies with respect to the trustee and his attorney (6);

3) Provide a complete copy of the trust instrument to any qualified beneficiary who requests one (7); and

4) Provide an annual accounting and relevant information about the assets and liabilities of the trust to each qualified beneficiary. (8) Note that a qualified beneficiary can, in writing, waive his or her right to an accounting, and such waiver is revocable. (9) As a further note, while a trust document may (and many do) purport to provide a waiver of the duty to account, F.S. [section]736.0105 provides that, while the terms of the trust generally prevail over this chapter, such is not the case with respect to the duty to ac-count. (10) The waiver of a duty to account contained in the governing document is not an effective waiver.

With respect to the affirmative duty to provide annual accountings, such must be rendered in a reasonably understandable report, identifying the trust, the trustee, and the time period covered. (11) While a trustee has some discretion with respect to the organization and ultimate form of the accounting, accountings are generally a chronological presentation showing each receipt and disbursement. As each beneficiary's rights will vary from each other (i.e., income beneficiary versus remainder beneficiary), a trust's accounting must classify the trust's receipt and disbursements as income or principal. (12)

A trustee's duty to account does not arise until the trust becomes irrevoca-ble. (13) Failure to prepare an accounting is a breach of trust. (14) When the trustee fails to account or fails to properly account, he can be ordered to do so by the court. (15) Effort should be made, prior to resorting to judicial intervention, to amicably resolve the perceived breach. Further remedies include reduction or denial of compensation or removal of the trustee. (16) When there are co-trustees, it has long been established that a trustee has standing to bring a cause of action, including to compel an accounting, against a co-trustee. (17)

The trustee...