Who is Entitled to Trust Accounts?

 In Trustee

Photo by Adeolu Eletu on Unsplash

This article describes the types of accounts trustees must maintain. But the next question is, who’s entitled to receive copies of accounts prepared by the trustee?

The Uniform Trust Code (UTC), which has been enacted (often with modifications) by 35 states and the District of Columbia, requires that accounts, which it calls “reports,” be distributed to all current beneficiaries annually and upon termination of the trust. Here’s its language:

A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified or nonqualified beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values.

As you can see, the statute’s language distinguishes between current “distributees” and “qualified” and “nonqualified” beneficiaries. Anyone to whom the trust currently must distribute income or principal or to whom it may distribute income or principal is a “distributee” and must receive annual accounts or “reports.”

A “qualified” beneficiary is defined broadly as a distributee and anyone who would be entitled to a distribution if the trust terminated or if a current qualified beneficiary’s interest were to end. For instance, if a trust said that the income be distributed to mom for her life and then to son, the son would be a qualified beneficiary as well as his mom. Pursuant to the UTC, non-current distributee qualified beneficiaries are entitled to annual accounts if they request them.

Interestingly, (at least for lawyers and perhaps other “nerds”) this is the only place that the UTC uses the term “nonqualified beneficiaries.” If we compare its definition of “beneficiaries” with its definition of “qualified beneficiaries,” it would seem that “nonqualified” beneficiaries includes anyone who might ever receive a benefit from the trust, no matter how contingent—such as grandchildren who may receive trust distributions if their parents die before their grandparents—and those holding a power of appointment over trust property. (Powers of appointment are explained here.)

To summarize, pursuant to the UTC, all current trust beneficiaries are automatically entitled to annual accounts from the trustee and all potential trust beneficiaries and those holding powers of appointment over trust property may request such accounts. But remember that 15 states have not adopted the UTC and those states that have adopted it may have modified it in ways that affect this provision.

Related Articles:

What are Trust Accounts?

When Does a Power of Appointment Cause Property to be Includible in the Power Holder’s Estate?

Does a Trustee or Agent under a Power of Attorney have a Duty to Report to Heirs?

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