Trustee Need Not Inform Remainder Beneficiaries

Elder Law Answers case summary.The Massachusetts Appeals Court holds that a trustee does not have a common law duty to provide information to the remainder beneficiaries. In Schwalm v. Schwalm (Mass. App. Ct. No. 22-P-783, July 7, 2023).

William J. Schwalm created a retirement trust and named his wife, Karen Schwalm, as trustee, and she became the beneficiary upon his death. Mr. Schwalm’s adult children from another marriage were the remainder beneficiaries and are set to receive the trust property after Mrs. Schwalm passes away.

The trust included a privacy provision giving the trustee sole and absolute discretion to provide information to a qualified beneficiary, including the power to limit access to non-directly applicable information.

Concerned about their inheritance, the adult children demanded that their father’s wife give them the following documentation: account statements, insurance policies, beneficiary changes, an inventory and accounting of the trust, and the prenuptial agreement. When Mrs. Schwalm refused, they asked the probate family court for a declaratory judgment requiring her to produce the information and a complete inventory of and accounting of all their father’s assets.

Relying on the privacy provision in the trust, the lower court granted Mrs. Schwalm’s motion to dismiss. The remainder beneficiaries appealed.

The appellate court considers whether Mrs. Schwalm must provide her late husband’s children with trust information and, if so, what kind of information.

The Massachusetts Uniform Trust Code (MUTC) requires a trustee to supply an accounting to qualified beneficiaries. As remainder beneficiaries, the children are not qualified beneficiaries under the trust. They will become qualified beneficiaries only after Mrs. Schwalm’s death.

Concluding that there is no statutory requirement for Mrs. Schwalm to provide an accounting to the children, the court next addresses whether a common law duty to account applies. The trustee has a basic common law duty to maintain the books and records of the trust. She also has an obligation to provide accounting records to qualified beneficiaries. No common law duty requires her to disclose information to nonqualified remainder beneficiaries.

The legislature had the opportunity to mandate that trustees convey trust accounting details to remainder beneficiaries but opted against it. Other state codes explicitly require information sharing with nonqualified beneficiaries, whereas Massachusetts does not. If the court were to find a common law duty, it would go against the Massachusetts legislature’s intent.

The grantor did not intend for his wife to share information with his children, as he included specific language about the importance of privacy in the trust. He primarily wanted the trust to benefit his wife, not his children. Requiring her to share an accounting would go against his clear intent.

Mrs. Schwalm is not obliged to share information with the remainder beneficiaries.

Read the full opinion.