A third party may not knowingly participate in a breach of trust. Even a non-transferee third party who knowingly participates in a breach of trust may not escape liability to the beneficiary for any loss occasioned by the breach of trust. See generally Loring and Rounds: A Trustee’s Handbook §7.2.9. Uniform Trust Code § 1012(b) purports to relieve prospective third-party service providers of the need to request and examine a copy of the entire trust instrument, which they would ordinarily want to do for purposes of ascertaining the trustees’ powers and the propriety of their exercise. Instead, third parties may rely on a so-called certification of trust as provided in UTC § 1013. Disclosure is limited to the following information: (1) that the trust exists and the date the trust instrument was executed; (2) the identity of the settlors; (3) the identity and address of the currently acting trustee; (4) the powers of the trustee; (5) the revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust; (6) the authority of the co-trustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee; (7) the trust’s taxpayer identification number; and (8) the manner of taking title to trust property. On the other hand, a third party who has actual knowledge that the trustee is exceeding or improperly exercising the trustee’s powers may not rely on such a certification.

UTC § 1013(h) provides that a third person “making a demand for the trust instrument in addition to certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.” As a practical matter, a third party, say, a financial institution, who demands to see, for whatever reason, a copy of the entire trust instrument is unlikely to be deterred from doing so by the ultra-remote prospect of being a defendant in a very public UTC §1013(h) action in tort initiated by the trustee at trust expense. A trustee who would go down that road would run a serious risk of being held personally liable for squandering trust assets, not to mention for frivolously compromising the privacy of the parties to the particular trust relationship. First, bad faith is hard to prove. Second, damages are likely to be nominal. Third, should the trustee not have simply sought the services of a third-party who was prepared to rely only on a certification of trust? Let’s assume that such a provider could not be found. Why not then have resorted to a simple contract-based non-disclosure arrangement between the trustee and a third-party who was unwilling to rely on a certification of trust alone but whose services were indispensable to a proper administration of the trust?

The duty of confidentiality owed to each beneficiary by a trustee in the trustee’s dealings with third parties and/or the other beneficiaries is taken up generally in §6.2.3 of Loring and Rounds: A Trustee’s Handbook (2022), which section is reprinted in its entirety, with enhancements, in the appendix immediately below. To obtain a copy of the 2022 Edition of Loring and Rounds: A Trustee’s Handbook in its entirety (1639 pages of text, plus front and end matter) visit the Wolters Kluwer “estore” at https://law-store.wolterskluwer.com/s/product/loring-rounds-a-trustees-handbook-2022e-misb/01t4R00000OVWE4QAP.