When can beneficiaries see a trustee's legal advice?
Key takeaway
Beneficiaries can see a trustee's legal advice in some jurisdictions under the fiduciary exception, which applies to advice sought for trust administration. The law on whether trustee communications with a legal representative are protected is unsettled and varies from state to state. No absolute certainty of privilege protection exists.
Who the fiduciary's representative serves
Practitioners describe a majority view under which a lawyer representing a fiduciary generally has a lawyer-client relationship with the fiduciary. Under that view, the relationship does not run to the estate, the trust or the beneficiaries.
Administration versus individual capacity
Trust and estate practitioners describe jurisdictions in which beneficiaries may inspect legal advice that a trustee obtained in a fiduciary capacity for trust administration. Communications with a lawyer who represents the trustee in litigation in an individual capacity may remain privileged.
Practitioners say a court may treat payment of legal fees from the trust as evidence of administrative representation. That payment may support applying the fiduciary exception.
The Delaware Chancery Court held that privilege did not bar beneficiaries from obtaining a trustee's legal memorandum. The memorandum was prepared to assist trust administration and was not prepared for the trustee's own litigation defense.
Florida statute and administration communications
A Florida court said that the Florida Supreme Court's decision not to adopt Section 90.5021 did not overturn the statute. The Florida Supreme Court had questioned the need for the privilege to the extent it is procedural, and the statute remains law in Florida.
Practitioners in Florida describe beneficiaries as intended third-party beneficiaries entitled to information when an attorney-client communication concerns normal administration issues. Communications about the fiduciary's own self-interest, such as defending a malfeasance suit, are described as privileged.
Texas privilege and the duty of disclosure
The Texas Supreme Court has held that the attorney-client privilege protects confidential communications between a trustee and the trustee's attorney under Texas Rule of Evidence 503.
Texas trustees owe beneficiaries a fiduciary duty of full disclosure of material facts that might affect the beneficiaries' rights.