Under the Tennessee Trust Code, is a trustee required to give beneficiaries information about their trust? Not necessarily.
The general rule is expressed in T.C.A. §§ 35-15-813(a) and (b). By default, a trustee is required to:
- Notify current income beneficiaries and vested remainder beneficiaries of the creation of an irrevocable or non-grantor trust within 60 days after acceptance and funding;
- Keep mandatory and permissible beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests; and
- Respond in a reasonable amount of time to requests for information.
In addition, the second and third points apply to persons who possess a non-fiduciary power of appointment over the trust.
When the notice requirement applies, the trustee must provide the appropriate beneficiaries with a complete copy of the trust instrument, along with the trustee’s name and contact information. Alternatively, the trustee may provide the beneficiaries with an abstract of the trust. The abstract must contain certain information, including the trustee’s contact information, number of current beneficiaries, information about distribution standards, and the current value of the trust.
The Tennessee Trust Code provides that a beneficiary or powerholder may waive the right to a trustee’s report or other information required under the statute. But what if the grantor does not want beneficiaries to have access to this information in the first place?
Unlike in Uniform Trust Code jurisdictions, the Tennessee Trust Code explicitly authorizes “silent trusts.” In a silent trust, the trustee is permitted to withhold information about the trust from its beneficiaries, including information about the existence of the trust. The relevant rule is found in T.C.A. § 35-15-813(e). It states that the notice and information requirements referred to above do not apply to the extent that the terms of the trust provide otherwise, or the grantor, trust protector, or trust advisor directs otherwise in a writing delivered to the trustee.
Nonetheless, the fact that a grantor can create a silent trust does not mean that he should. A trustee that can withhold information is an unaccountable trustee. Under these circumstances, a trustee who abuses his power is difficult to police. Therefore, silent trusts should be used sparingly and only in situations where secrecy is truly in the best interests of the beneficiaries. Even then, the grantor should strongly consider naming a trust protector who can receive information on behalf of the benighted beneficiaries.
Source: T.C.A. § 35-15-813
Posted by Joel D. Roettger, JD, LLM, EPLS