Clients often ask about the protections that their children and/or other beneficiaries of their estate plan possess, particularly when discussing their fiduciary appointments and the safeguards in place to ensure such fiduciary fulfills their duties to the beneficiaries. While the specific discussion and citations in this article are limited to rights of beneficiaries in Mississippi, most states provide beneficiaries of estates and trusts certain rights to information to ensure transparency and the proper administration of their interests. This discussion provides an analysis of these rights and the legal framework governing them.
Estate Beneficiaries
The executor or administrator of an estate must file an inventory, verified by oath, of the money and property owned by the decedent at the time of death, listing it with reasonable detail, and indicating as to each listed item its market value as of the date of decedent’s death and the type and amount of any encumbrance that may exist with reference to any item.[1] This requirement to file an inventory may be waived, however, by the decedent in a testate estate, and by the chancellor in an intestate estate.[2] Notwithstanding the waiver of the requirement to file an inventory, whether by the decedent or the chancellor, the court or chancellor may later order the executor or administrator to file an inventory upon the petition of a beneficiary of the estate or another interested party if the court or chancellor determines that the filing of inventory is necessary or advisable.[3]
Likewise, the executor or administrator is also required to present to the court an accounting showing disbursements and receipts from and to the estate, specifically showing the amount and the sources from or to which funds were paid.[4] Similar to the requirement to file an inventory, this duty to present an accounting may be waived by the decedent of a testate estate and the chancellor in an intestate estate, but such accounting may later be ordered by the chancellor upon petition of an interested party.[5] While trust beneficiaries are expressly given right to information under the Mississippi Uniform Trust Code, the ability of an estate beneficiary to petition for an inventory and accounting of the estate, even when formerly waived, provides such beneficiary with a similar protection, especially when estate administration will generally be overseen by the chancery court, while trust administration often occurs exclusive of any court involvement.
Trust Beneficiaries
Mississippi law mandates that trustees must keep beneficiaries reasonably informed about the administration of the trust and the material facts necessary to protect their interests.[6] Specifically, trustees are required to keep beneficiaries of a trust that are current mandatory or permissible distributees of trust income or principal, or both, reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.[7] Additionally, trustees must respond within a reasonable time to any qualified beneficiary’s[8] request for information related to the administration of the trust.[9] This provision ensures beneficiaries can obtain the necessary details to understand how the trust is being managed. To prevent undue burden on the trustee, the statute allows for reimbursement of reasonable expenses incurred in responding to such requests.[10]
Furthermore, a trustee must notify beneficiaries within sixty (60) days after the acceptance and funding of an irrevocable trust.[11] This notification must be given to each current income beneficiary, each vested ultimate beneficiary of a remainder interest, and anyone holding a power of appointment. This initial communication is crucial for transparency and sets the stage for ongoing information sharing. The duty to inform can be waived or modified under certain conditions.[12] This can be done by the beneficiaries or someone holding a power of appointment,[13] as well as the settlor, a trust protector, or a trust advisor. [14] For instance, these duties can be waived during the settlor’s lifetime or modified to specify a different age at which beneficiaries must be notified.[15]
Case Law Interpretation
Mississippi courts have interpreted these statutory provisions to reinforce the fiduciary responsibility of trustees to maintain transparency. For instance, in Matter of Estate of McClerkin,[16] the court emphasized the importance of including all interested parties in a Will contest to ensure that all parties with a pecuniary interest are informed and can protect their interests. Similarly, in Walker v. Cox,[17] the court underscored the requirement for trustees to provide sufficient information to beneficiaries, stating that the trustee’s repeated failure to provide an accounting of the relevant trust “certainly cast shadows as to the ability of the trustee to perform his duties,” further reinforcing the statutory mandate for transparency and accountability in trust administration.
Practical Implications for Beneficiaries
Beneficiaries have the right to receive timely and accurate information, which is essential for ensuring that the estate or trust is administered in accordance with the decedent’s wishes (and complies with the relevant statutes and case law.) Detailed records and transparent reporting help beneficiaries monitor the fiduciary’s actions and decisions. When beneficiaries are informed, they are in a better position to address any concerns or disputes that may arise. For instance, if a beneficiary suspects mismanagement, they can request additional information and, if necessary, seek judicial intervention. Access to information also aids beneficiaries in financial planning and decision-making. Understanding the estate or trust’s assets, income, and expenditures allows beneficiaries to make informed decisions about their own financial affairs, especially if distributions therefrom constitute a significant portion of their income.
Trustee’s Perspective: Balancing Duties and Rights
As trust administration, unlike estate administration, often occurs without any court involvement, trustees must be cognizant of their duty to comply with these information-sharing requirements, but they also have the right to be reimbursed for reasonable costs associated therewith.[18] This balance ensures that the administrative burden does not unduly fall on the trustee. Trustees must also balance the duty to inform with the need to protect confidential information[19]. Only relevant and necessary information should be shared, and trustees must ensure that sensitive details are handled appropriately to maintain the trust’s integrity and the beneficiaries’ privacy.
Notwithstanding, even when a trustee may not be required to provide information to trust beneficiaries, or to the extent a beneficiary requests more information than is required, transparency by the trustee can prospectively avoid future disputes. Additionally, when a trustee adequately discloses information to beneficiaries regarding the existence of a potential claim for a breach of trust, the statue of limitations for such beneficiaries to pursue a claim for breach of trust related to the disclosed information is shortened to only one (1) year.[20] As such, it is often prudent for a trustee to disclose more, rather than less information, as such will reduce the potential for future conflict and definitively shortens the time frame for beneficiaries to pursue any claim related to the disclosed information against the trustee.
Conclusion
Mississippi law provides a robust framework to ensure that beneficiaries of estates and trusts are kept well-informed about the administration of their interests. By mandating timely notifications and responses to information requests and allowing for the waiver or modification of these duties under specific conditions, the law seeks to maintain a balance between transparency and practicality. Beneficiaries and fiduciaries alike must understand these provisions to ensure compliance and the proper administration of trusts.
[1] Miss. Code Ann. § 91-7-93.
[2] Id.
[3] Id.
[4] Miss. Code Ann. § 91-7-277.
[5] Id.
[6] Miss. Code Ann § 91-8-813.
[7] Miss. Code Ann. § 91-8-813(a)(1). Note, however, that Miss. Code Ann. § 91-8-105(d), provides that the duties of a trustee to give notice information, and reports under § 91-8-813(a) and (b) may be waived or modified by the settlor (or trust protector/trust advisor if given the power to do so) by giving notice in writing to the trustee (1) by waiving or modifying such duties as to all qualified beneficiaries during the settlor or settlor’s spouse’s lifetime, (2) by specifying at a different age at which a beneficiary or class of beneficiaries must be notified under § 91-8-813(a), or (3) by designating a beneficiary surrogate to receive such notice, information, and reports who will act in good faith to protect the interests of the beneficiary or beneficiaries.
[8] Miss. Code Ann. § 91-8-103(21) defines “qualified beneficiary” as a beneficiary who, on the date the beneficiary’s qualification is determined, (A) is a distributee or permissible distributee of trust income or principal, (B) would be a distributee or permissible distributee of trust income or principal if the interests of the distributes described in (A) terminated on that date without causing the trust to terminate, or (C) would be a distributee or permissible distributee of trust income or principal if the trust terminated on the date.
[9] Miss. Code Ann. § 91-8-813(a)(2).
[10] Id.
[11] Miss. Code Ann. § 91-8-813(b).
[12] Miss. Code Ann. §91-8-105(b)(8) and (9).
[13] Miss. Code Ann. § 91-8-813(d).
[14] Miss. Code Ann. §91-8-105(d).
[15] Id.
[16] 651 So. 2d 1052 (Miss. 1995).
[17] 531 So.2d 801, 804 (Miss. 1988).
[18] Miss. Code Ann. § 91-8-813(a)(2). Note, however, that such requirement for reimbursement does not include costs associated with a trustee’s breach of duty.
[19] Miss. Code Ann. § 91-8-813(g) provides that if a trustee is bound by any written confidentiality restrictions, such trustee may require any beneficiary eligible beneficiary to agree in writing to be bound by the same confidentiality restrictions of such trustee.
[20] Miss. Code Ann. § 91-8-1005(a).
