3.2 The Nature and Scope of the Trustee’s Duty
The issue as to the scope and nature of a trustee’s duty to provide information to a beneficiary was side-stepped in a recent case by the Court of Appeals. On its way up in Johnson v. Johnson, however, the Court of Special Appeals had characterized the right to information and to an accounting in sweeping terms that emphasized that those rights were essential if beneficiaries have enforceable rights. The Court of Special Appeals, quoting Bogert, stated:
A [testator] who attempts to create a trust without any accountability in the trustee is contradicting himself. A trust necessarily grants rights to the beneficiary that are enforceable in equity. If the trustee cannot be called to account, the beneficiary cannot force the trustee to any particular line of conduct with regard to the trust property or sue for breach of trust. The trustee may do as he likes with the property, and the beneficiary is without remedy. If the court finds that the settlor really intended a trust, it would seem that accountability in chancery or other court must inevitably follow as an incident. Without an account the beneficiary must be in the dark as to whether there has been a breach of trust and so is prevented as a practical matter from holding the trustee liable for a breach.
Johnson involved the remainder beneficiary in a credit shelter trust seeking an accounting from his stepmother, the sole trustee and the only beneficiary during her life. Although the credit shelter trust provided that she receive all income during life, the right to withdraw principal was governed, unsurprisingly, by an ascertainable standard. The trust also provided for a marital trust to which the stepmother/trustee had extensive rights, including, she claimed, a general inter vivos and testamentary power of appointment.
In Johnson the remainder beneficiary was granted his right to an account in the circuit court. The Court of Appeals dismissed the appeal as not ripe due to the lack of an appealable order and directed the opinion of the Court of Special Appeals to be vacated.