The challenge of maintaining the privacy of a non-testamentary discretionary trust with multiple permissible beneficiaries

Charles E. Rounds, Jr.
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Assume X is an innocent discretionary beneficiary of an irrevocable non-testamentary trust with multiple permissible beneficiaries (the “trust”). Y is a not-so-innocent co-beneficiary, that is to say he has not been paying his just debts. The trustee being a fiduciary owes each a duty to keep the affairs of the trust confidential. Absent special facts, however, neither beneficiary owes the other such a fiduciary duty. Is there anything that X can lawfully do to prevent Y or Y’s creditors from subjecting X’s equitable property interest to public scrutiny? The Sergei Viktorovich Pugachev Case, [2015] EWCA Civ. 139 [England and Wales Court of Appeal (Civil Division)] suggests that at least when it comes to litigating issues such as whether the trust is a sham or whether the trustee is subject to the control of the defendant-beneficiary the other beneficiaries may have an uphill battle keeping the terms of the trust private. The trustee’s duty of confidentiality is covered generally in §6.2.3 of Loring and Rounds: A Trustee’s Handbook (2016) [pages 631-632], which is reproduced in its entirety below.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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