In this unpublished opinion, the Court of Appeals seems annoyed and impatient with the childish arguments of a Trustee who is trying to avoid sharing tax information with trust beneficiaries.
Certain remainder beneficiaries asked the Trustee to provide a copy of the Form 706 (the Federal Estate Tax Return) of the deceased settlor. The Trustee resisted, seeking an order determining that he does not have to provide the 706, or if he does, that the 706 be subject to a confidentiality agreement or protective order that precludes the beneficiaries from sharing any informed so disclosed.
The beneficiaries argued that pursuant to MCL 700.7814, the Trustee has a duty to provide them with “relevant information about trust property” and that the Form 706 obviously meets with that description.
The Trial Court ordered to the Trustee to provide a copy of the 706 to the beneficiaries and did not require that it be subject to a protective order or confidentiality agreement. The Court of Appeals affirms.
First, the Trustee argues that the beneficiaries requesting the information lack standing to request the tax return because their beneficial interest has not vested. In what seems like a lecture from law school 101, the COA explains the difference between unvested interests and vested interests subject to defeasance, and in doing so, the COA holds that these beneficiaries have standing.
The Trustee then argues that he signed the tax return in his capacity as Personal Representative of the Estate, and not as Trustee, and therefore the beneficiaries’ made their request to the wrong person (or the right person but in the wrong fiduciary capacity), and that since this is really a decedent’s estate matter, the rights of trust beneficiaries to reasonable information pursuant to MCL 700.7814 would not apply. The COA notes that the trustee has the Form 706 in his possession as trustee, and as such, it is information that relates to the trust and can be requested.
Finally, the Trustee argues that, if the beneficiaries are allowed to see the Form 706, they might disclose information to third parties and by doing so cause the value of closely held assets in the trust to be depressed. The Trustee says that the trial court erred by ordering the information be disclosed without a protective order or confidentiality agreement. In response, the COA says that the Trustee is confused about his role, and that his duty lies to the beneficiaries who have a right to information, and who are the ones with the greatest interest in making sure assets in the trust are not depressed.
This case is called: In Re Michale Eyde Trust (click on the name to read the case). This is not the first appellate decision to come out of the administration of this trust, and probably won’t be the last. The Eyde family are BIG time developers in the Lansing area, and this trust alone holds assets in excess of $170 Million.
Two things to be taken from this case I think:
- Tax returns are generally within the scope of documents a trust beneficiary would be entitled to obtain pursuant to a request under MCL 700.7814 (to the extent you really need legal authority for that proposition); and
- When there’s that much money in play, it’s probably inevitable that some portion of it has to be spent on wasteful litigation.
[The opinion also includes a separate situs dispute, which is interesting, but more detailed and nuanced than I am inclined to tackle this morning.]