Automatic Disclosure Vs Liability
Whilst most fiduciaries are willing to provide information such as trust instruments and bank account information to the donor and beneficiaries, there is a general reluctance to disclose any other information or documents to anyone else unless required by law.
The general practice is to request written approval from the donor prior to dissemination of information regardless of who the recipient might be. In yesterday’s world, the words “bank secrecy” were used as an attribute when describing reasons for establishing an offshore trust. After time, the word “confidentiality” was perceived to be more politically correct. In today’s world, anything to do with secrecy and confidentiality is discouraged.
The industry has moved toward transparency with emphasis on clients who are reporting and are compliant in their home jurisdictions. However, as tax laws change, many clients find themselves on the wrong side of the tax code almost overnight. When this happens, fiduciaries run the precarious gauntlet of disclosing clients to regulators or risk a legal battle by which the client sues for breach of confidentiality. This is why an important feature of any trust is a disclosure clause that allows the trustee to forward information to regulators with out fear of reprisal.
When disclosure without consent is imminent, trustees often seek a Beddoe Order. The order protects the trustees against claims by beneficiaries who suggest that an action should not have been brought and enables the trustees to recover the costs from the trust property.
Moral of the story, check your trust deed and review the clause on the duty to disclose…
