In the 1988 film “Rain Man,” the estranged son of a millionaire discovers he has been essentially cut out of his father’s estate. Upon his father’s death, Charlie Babbitt (Tom Cruise) inherits a 1949 Buick Roadmaster and a collection of rosebushes that he bitterly hates; the remaining $3 million of the estate passes to a trust fund for an unnamed beneficiary.
Babbitt demands to know the identity of this beneficiary. His father’s attorney stonewalls him and it seems he’ll never know. But, because it’s Hollywood, he finds out anyway – by sheer narrative coincidence, of course – that the unnamed beneficiary is in fact his long-lost autistic brother, Raymond – or “Rain Man,” as Babbitt remembers him.
But what if he hadn’t miraculously run into his brother? He demanded to know the identity of the beneficiary, but was denied. Is that legal? Does a beneficiary of an estate have a right to know the the distribution details of the remaining estate?
Let me give you my best impression of a lawyer’s answer: it depends.
A trustee is charged with administering the contents of a trust, a responsibility which includes making distributions to the trust beneficiaries. Additionally, the trustee is held to what is known as a fiduciary duty. Essentially, this duty is a commitment to act responsibly and NOT WASTE THE COURT’S TIME (I feel your pain, FedEx guy). Remember this fiduciary duty, we’ll come back to it.
Now, some states make the beneficiary’s right to know an absolute. Others have moved the other way, upholding the privacy of the trust even from the people it benefits.
Currently, Maryland is somewhere in the middle.
I say “currently” because Maryland’s stance tends to fluctuate depending on who is presiding over the case and how determined each legislature is to finally addressing it. Until someone does, the standard to determine whether the beneficiary has a right to know may depend on how good your lawyer is and which judge you draw.
You see, the state holds that a beneficiary has the right to demand an accounting of a trust. That means that if you’re receiving funds from a trust, you have the right to know whether the funds are being managed and distributed appropriately.
Now, the argument goes that your “right to know” may reasonably include knowing who the other beneficiaries are so you can truly understand why the funds are being invested or spent in the manner they are. How convincing that argument will be, as I said, may depend on who is making the argument and who is hearing it.
The argument will be more convincing if the challenging beneficiary also has a residual right to the estate. In other words, your request to know the identities of the unnamed beneficiaries stands a better chance if you are supposed to inherit what is left of their distributions after they have passed away. Then you have a strong interest in why they are burning through the distributions so quickly – because you are essentially losing what they are spending, so they’d better be spending it responsibly.
That’s the first argument Tom Cruise’s character might have been successful with in court. The second possible one brings us back to the fiduciary duty.
Recall that the state recognizes a beneficiary’s right to know to information that is relevant to an accounting of the trust’s administration; the trustee must comply with this request. If the beneficiary feels the other beneficiaries identities are relevant, and the trustee denies this information, then the beneficiary has no other option than to file a petition in the Circuit Court, an action that would incur costs not only to himself but to the Trust.
Judges don’t like this sort of thing. Unless there is a compelling reason to withhold the beneficiary’s identity (“compelling” defined here as “not petty”), the trustee is likely to incur the Judge’s wrath for – you guessed it – wasting the court’s time.
Thus a smart trustee with good counsel will tactfully modify his position to: “I will give you all information that is relevant to the proper administration of the Trust.”
If this trustee does not modify his position, a smart lawyer will add a count to the Petition to have him removed. If the trustee takes this arrogant posture into the Court, you can bet the Judge will gladly remove him as trustee.
Now, Rain Man is one of a select number of films to overwhelm both the box office and the Academy Awards, so I won’t begrudge director Barry Levinson his grasp of beneficiary rights in the State of Maryland – especially since the film is set in Ohio. But enough about the Rain Man. What do you think?
Good luck and good hunting.
Randy
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The Fisher Law Office is known for its experience in estate planning, probate administration, asset protection, and business development. Annapolis attorney Randall D. Fisher has practiced for over 20 years, maintains the highest peer review rating for ethics (AV Preeminent) by Martindale-Hubbell, and is a sucker for long walks on the fairways.
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