Must a Trust Accounting be Provided to Beneficiaries?

Jan 25, 2023 8:41:00 AM


Must a Trust Accounting be Provided to Beneficiaries_

Some trust beneficiaries may feel left in the dark about the terms of their trust and the amount of property in their trust. Whether or not the trustee has a duty to provide the trust document or a trust accounting to the beneficiaries of an irrevocable trust is a matter of state law. But what happens when the terms of the trust conflict with state law?

This issue was recently litigated in Nevada. In this case, Jon created an irrevocable trust for the benefit of his children, Julia and Alexander. An independent trustee, Michael, was serving, alongside Jon’s brother as the family trustee.

After Jon passed away, both trustees started administering the trust and made some distributions for the benefit of Julia and Alexander. Two years later, Julia and Alexander requested a copy of the trust document along with a trust accounting. These requests were denied by the trustees and the beneficiaries filed suit.

The district court ruled that the beneficiaries were not entitled to a trust accounting but did require the trustees to provide them with tax returns, an asset list, and a summary of transactions. In addition, the court ruled that while the beneficiaries were not entitled to receive a full copy of the trust agreement, they were entitled to receive the portions of the trust that affected their rights thereunder. All parties appealed.

Julia and Alexander argued that they were entitled to a trust accounting under NRS 165.180 and NRS 165.1207. The Supreme Court of Nevada disagreed. The former statute doesn’t abridge the power of the court to require an accounting and the latter statute excludes beneficiaries with discretionary interests from being entitled to receiving a trust accounting.

However, the Supreme Court turned to look at the provisions of the trust. Julia and Alexander argued that they were vested beneficiaries and thus entitled to an accounting under the terms of the trust. The trustees argued that because Julia and Alexander were only discretionary beneficiaries, they did not have a vested interest. The court disagreed, reaching the conclusion that Julia and Alexander are “present and primary beneficiaries, they are therefore not contingent beneficiaries.” As such, they were entitled to certain records under the terms of the trust, including a copy of the trust and the trust accountings.

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Topics: legal news

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