0370 1500 100

The Trust Register has brought about a new set of challenges for trustees in dealing with family issues.

The online register is now the only way trustees can comply with their obligations to HMRC and report details of any tax liabilities.

But while serving a clear purpose at one level, at another it could introduce some tricky complications.

The registration process requires trustees to include the personal details of potential beneficiaries, and classes of beneficiaries where individual beneficiaries cannot yet be identified. This could upset family dynamics. Given that a National Insurance number must be provided, and the trustee has to take reasonable steps to obtain it and show the steps taken if failing to do so, it risks opening a can of worms by alerting family members to future inheritances which may or may not come about. Such notifications, perhaps about a remote possibility, have the potential to fuel family tensions.

So what should the trustee do? They could consider whether they can obtain the personal information required from other sources, or whether the trust instrument would permit the exclusion or change of any named potential beneficiary or class of beneficiaries. But they must always act within the scope of their powers identified in the trust instrument, and within their duty to act impartially as between the beneficiaries. This means they must treat different beneficiaries fairly, and those within the same class equally.

If a potential beneficiary, who was previously unaware of their ‘potential’ to inherit, is alerted to their status because of a request from trustees for their personal information, they may start probing for more information about the trust and its assets. Now what should the trustee do? They should consider the interest of the beneficiary. If it is remote, that should limit the type of information that should be made available. The trustee should consider disclosing the core trust documents if requested, but with sensitive information (which might affect other beneficiaries) being redacted. Documents relating to the personal wishes of the settlor which might be expressed in a letter of wishes, or which relate to decisions made by the trustees, should only really be disclosed in exceptional circumstances, and even then perhaps with safeguards. There could be redactions, or undertakings obtained from the inquisitive beneficiaries which limits use and disclosure.

Fundamentally, trustees should not rush to placate a beneficiary who proves to be persistently inquisitive. Beneficiaries do not have an entitlement as of right to obtain documents, though trustees do owe the beneficiaries a fundamental obligation to act honestly and in good faith. As such, they must comply with that obligation when considering the demand for disclosure, whilst also weighing up the possible impact and consequences of disclosure on other beneficiaries. If they are uncertain as to whether to comply with a particular beneficiary’s demand for disclosure, it would be prudent to take specialist advice on the issue.

The Court, through a couple of seminal case authorities, has given some helpful guidance. If the concern and uncertainty persists, the trustees could apply for directions from the Court on the issue. However the Court will want to know whether there has previously been a careful and considered deliberation about whether to disclose before coming to Court, because if not, it may be slow to allow the trustees to recover from the trust’s assets the costs of seeking direction.

The Trust Register will not (without statutory change) be open to the public, though it will be accessible by the law enforcement agencies. However it is conceivable that this requirement to provide personal details of potential beneficiaries could lead to trustees facing more demands for information and greater scrutiny of their conduct, stoking up an increase in trust-related claims.

On the one hand beneficiaries, potential or otherwise, should be able to expect the trustees to act honestly and fairly.  But on the other hand trustees can only do so when considering the interests of all the beneficiaries. Therein lies the friction which this new registration requirement is, at best, unlikely to lessen.

Now is an important time to review your trusts, to ensure they are fully compliant, are being administered correctly, and are meeting the real purpose of the trust and the needs of the right beneficiaries.

Our experts have created a handy guide to help trustees and their advisors, please download it here Top Ten Trustee Tips

Published: 24 April 2018


A monthly briefing from Irwin Mitchell Private Wealth

Sign up to receive a moment of clarity

April 2018