Rights of Beneficiaries to Information in a Trust

Rights of beneficiaries

BENEFICIARIES are entitled to certain information about the trust of which they are beneficiaries and trustees have a duty to disclose this information. But trustees can sometimes be reluctant to disclose certain information, or beneficiaries may not know exactly what they are entitled to see.

The trustee(s) of a trust are the custodians or custodians of the assets held in that trust and it is their responsibility to ensure that the finances and records of the trust are taken care of and kept up to date. The trustees act according to the instructions of the founder of the trust as set out in the deed of trust, which is the founding document of any trust. Their duties typically include; record expenses and income, distribute funds to beneficiaries, file tax returns on any income generated by the trust, and keep records of other transactions that occur. “This means that a trustee acts as a fiduciary – they deal in good faith with the assets in the best interests of the beneficiaries of the trust,” says Katherine Timoney, partner at boutique, commercial law firm Gillan and Veldhuizen Inc. . .

Because of this fiduciary relationship, a fiduciary is required to report on the affairs of the trust to a beneficiary so that the beneficiary can establish, for example, what, if any, he is entitled to have distributed. One is indeed entitled to see the trust documents which set out the terms of the trust, the identity of the trustees and the assets within the trust, as well as the trust deed.

In a relatively recent case which ruled on this duty of the trustee, Doyle v Council of Executors [1999] 1 All SA 309 (C), in which a capital beneficiary (who would be distributed the capital of the trust upon its dissolution and distribution) requested a full audit of the trustee as to what had been done with the assets of the trust. the trust during the life of the trust. He was refused on the grounds that he only became a beneficiary after the death of his mother.

The Court concluded that:

“Upon his death he obtained the right to receive the capital of the trust. Whether it was invested or reinvested over the years, it had to be passed on to him. Therefore, the defendant was bound, in handing it over, to satisfy him with proper explanations, that this was what it was supposed to be.; the full and true capital of confidence, neither more nor less. He couldn’t do that just by providing her with unjustified and untested opening balances on an account. He is therefore required, in fulfilling his duty in good faith, to demonstrate to him that what he has received is the exact product of the initial capital, regularly administered.

“The beneficiaries are therefore entitled to accountability from the administrators regarding the benefit they are to receive,” explains Timoney. In this case, the beneficiary was to receive the capital of the trust and he therefore had to account for the capital of the trust for the duration of the trustee’s tenure as trustee of that trust – to enable him to confirm for himself that the amounts are correct and to hold the trustees accountable as trustees for managing the assets of the trust on their behalf.

Disputes often arise between trustees and beneficiaries and sometimes even between co-trustees. “In these circumstances and to avoid potential lengthy and costly legal proceedings to resolve issues, donors and those drafting trusts should consider inserting an alternative dispute resolution clause into trust deeds providing for mediation. and arbitration,” advises PJ Veldhuizen, MD and litigation resolution specialist at the firm.



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