A trust is a fiduciary relationship with respect to property, one that imposes enforceable duties on the titleholder, in this case the trustee. A so-called trust that is unenforceable is a trust in name only. Thus, a so-called trust under which its “beneficiaries,” or their surrogates, are to be kept in the dark as to the rights, duties, and obligations that are incident to that relationship is a trust in name only, secrecy being incompatible with accountability. What, then, are we to make of so-called trusts whose terms expressly purport to impose no fiduciary duties on title-holding “trustees,” hereinafter “nonfiduciary trusts,” or whose terms expressly purport to relieve “trustees” of the duty to keep the “beneficiaries” informed of the existence, nature, and scope of their ostensible equitable property rights, hereinafter “quiet trusts”? Is a nonfiduciary or quiet trust just an outright completed gift to the title-holder masquerading as an entrustment? Or perhaps some kind of a third-party-beneficiary contract that not only can survive the death of the two parties to it, the settlor and the inception trustee, but also the current non-existence of its beneficiaries, think unborn and unascertained remaindermen? Or maybe all we have here is a simple agency in which the settlor is the principal and the trustee is his or her agent. On the other hand, in the years to come we may find the equity courts inclined to deem these curious relationships nonetheless to be true trusts, ignoring those express nonfiduciary features that are incompatible with classic trust doctrine. Recall that equity traditionally looks to the substance of a relationship rather than to its packaging when it comes to sorting out the rights, duties, and obligations of the parties to that relationship. It will endeavor to ascertain a settlor’s true intent from a reading of the governing instrument in its entirety. In any case, one wonders why a prospective trust settlor who is fully informed of and has a full subjective understanding of the applicable law and facts would ever elect to forego the fiduciary protections afforded both a trust’s purposes and the equitable property rights of its beneficiaries, the fiduciary principle being one of the crowning achievements of the Anglo-American legal tradition. It falls to the drafting attorney, who himself or herself is a fiduciary, an agent-fiduciary to be precise, to see to it that the prospective settlor fully appreciates the nature, and even more importantly the ready availability, of those protections, not to mention the all-but-inevitable adverse economic consequences of venturing into uncharted doctrinal waters.
For an exhaustive discussion of the current state of nonfiduciary-trust jurisprudence, see Jeffrey Schoenblum, The Nonfiduciary “Trust”, 46 ACTEC L. J. 357 (2021). The quiet trust is the subject of §9.9.25 of Loring and Rounds: A Trustee’s Handbook (2021), which sub-section is reproduced in its entirety in Appendix A immediately below. Information surrogates in the quiet-trust context are taken up in §6.1.5.1 of Loring and Rounds: A Trustee’s Handbook (2021), the relevant parts of which sub-section are reproduced in the Appendix B below.
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