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Discretionary beneficiaries have rights too!

By Andrew Steele - 8 Sep 2017

While the 'parent settlors' of a family trust are alive and have their mental capacity, the issue of monitoring what the trust is doing is not an issue. But once the parents die or lose capacity and the administration of the trust transfers to the 'professional trustees', it often becomes the task of the children to ensure that the trustees act reasonably, competently and are held to account for their decisions. But how?

If 'sunlight is the best disinfectant' then seeing what trustees are supposed to be doing and comparing that with what they are doing is the best, if not only, way to police trustees.

Fortunately, the Supreme Court recently outlined the rules and principles about what trustees ought to disclose to trust beneficiaries. The Court saw the starting point as being the obligation of a trustee to administer the trust in accordance with the trust deed and the duty to account to beneficiaries. A beneficiary who seeks such an account may seek access to documentation necessary to assess whether the trustee has acted in accordance with the trust deed.

While trustees have a discretion as to what they disclose, they must exercise that discretion in a principled way. This effectively means that they would almost invariably be obliged to supply the trust deed and the trust's financial statements if a beneficiary requests them. They may also be required to hand over minutes and resolutions, although details of distributions and names of other beneficiaries may be deleted for reasons of privacy. On the other hand, it is unlikely they would have to hand over the settlor's memorandum of wishes or the reasons for making any distribution.

If you would like to know more about your rights or obligations, then contact any one of our specialist trusts and estate litigation team who will be happy to assist and advise.


Andrew Steele


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