Duty of disclosure – the unique rules for estates and trusts
We all know that lawyers have a duty to hold client information confidential – it’s one of the foundations of our legal system. But estates are a special matter. If we follow the letter of the law regarding confidentiality, a drafting lawyer would be unable to release the testator’s will following their death.
To overcome this potential problem, the common-law has developed what is known as the “wills exception” to the rules regarding confidentiality between a lawyer and their client. The “wills exception” lets the drafting lawyer divulge the existence and contents of a will to those with an interest in the estate. Easy – problem solved.
Of course, not all estates are straightforward, and matters can get complicated if a will is contested. During an estate dispute, many third parties may request that a drafting lawyer divulge certain information about the deceased’s estate planning. The purpose is to find information that can help shed light on the deceased’s true intentions in relation to their estate.
Since deceased individuals can’t speak for themselves and explain intentions or waive their rights, caselaw has made it clear that the estate trustee may step into the shoes of the deceased and waive confidentiality or privilege. However, the group of individuals who may have the drafting lawyer waive privilege or confidentiality could be quite diverse, including beneficiaries, next of kin, and potentially even creditors of the deceased.
Since it’s unlikely that this group of individuals will speak with one mind in an estate dispute and collectively decide to waive privilege or confidentiality, a lawyer who is faced with the issue of releasing confidential information or documents should seek the consent of all parties with a financial interest in the estate before releasing such documents. And in some cases, the drafting lawyer may wish to seek the guidance of the court on the issue of what, if any, documents they should release.
For a detailed discussion of the issue of solicitor client privilege in an estate context, this paper reviews many of the key cases.
Disclosure rules for trusts
The cases related to trusts are many, but a few rules have emerged in relation to disclosure duties related to trust arrangements.
- Disclosure to a beneficiary: As a general rule, the beneficiaries of a trust may, on reasonable notice, require the trustees to produce for their inspection any trust document that the beneficiaries wish to see.
- Disclosure to a discretionary beneficiary: While a discretionary beneficiary is entitled to view trust documents, they are not entitled to see any documents or information pertaining to why the trustee did (or did not) exercise their discretion in the trust.
- Trustee obligation to inform: Generally, there is no positive obligation on the part of a trustee to give unsolicited information to beneficiaries. There are some exceptions however – most notably with minor beneficiaries. A trustee of a trust in which there are minor beneficiaries has a positive obligation to inform the minor beneficiary of the existence of the trust once they come of age, and to show the trust deed and any other relevant documentation that explains or sets out the basis of the trust.
For a more detailed examination of disclosure rules relating to trusts, this paper discusses many of the leading cases in this area. Thanks for reading.