## Facts

- John B. Jacob died in 1994, leaving a will creating two testamentary trusts (a Marital Trust and a Family Trust) funded to avoid federal estate tax.
- John’s widow, Harriett Bell Jacob, was the income beneficiary; John’s son, William H. Jacob, was the sole remainder beneficiary.
- Michael W. Davis served as independent trustee with “sole and absolute discretion” to make principal distributions to Harriett for her health, education, and support, while considering her other resources; Harriett could not participate in decisions to distribute principal to herself.
- The will required the trustee to account to the trust’s income beneficiary and stated that the trustee would be discharged from further accounting upon the income beneficiary’s approval.
- During Harriett’s lifetime, William requested an accounting; Davis refused, stating he could not provide it without Harriett’s approval.
- After Harriett died in 1997, William again requested an accounting, suspecting improper principal distributions; Davis produced assorted records that often did not distinguish income from principal, preventing evaluation of whether distributions complied with the trust terms.
- William sued Davis and related entities alleging breaches of fiduciary duty and seeking an accounting and related equitable and monetary relief.

## Issues

1. Whether a remainder beneficiary is entitled to an accounting and adequate information during the lifetime of the income beneficiary despite a will provision directing accountings to the income beneficiary and providing discharge upon that beneficiary’s approval.
2. Whether providing incomplete records that do not distinguish income and principal distributions can satisfy a trustee’s fiduciary duty to inform and account to a remainder beneficiary.
3. Whether the trial court erred by entering judgment for defendants on all counts at the close of the plaintiff’s evidence under Maryland Rule 2-519.

## Decision

- The appellate court reversed the trial court in substantial part and remanded for further proceedings.
- A remainder beneficiary has a right to a meaningful accounting and sufficient information to protect the remainder interest; the will’s accounting/discharge language did not eliminate that right.
- The evidence could support a finding that the trustee breached fiduciary duties by refusing to provide an accounting during the income beneficiary’s life and by providing inadequate, unclear documentation after her death.
- The trial court erred in granting judgment for defendants across all claims at the close of the plaintiff’s case; at least the fiduciary-duty/accounting-related claims should have proceeded.

## Legal Principles

- A trustee owes duties of loyalty, impartiality, and disclosure to all beneficiaries, including remainder beneficiaries, and must provide information reasonably necessary for them to protect their interests.
- An instrument’s direction to account to an income beneficiary, and language purporting to discharge the trustee upon that beneficiary’s consent, cannot negate core fiduciary obligations owed to nonconsenting remainder beneficiaries.
- Even when a trustee is granted broad discretionary distribution authority, that discretion must be exercised in good faith, consistent with the trust purposes, and with due regard for other beneficiaries’ interests; it remains subject to judicial review.
- A fiduciary accounting requires clarity sufficient to evaluate compliance with the trust terms; supplying raw or incomplete records that obscure whether distributions were from income or principal may be inadequate.

## Conclusion

The court held that a sole remainder beneficiary was entitled to a meaningful accounting and adequate disclosure from the trustee, and that will provisions emphasizing accountings to the income beneficiary could not bar enforcement of fiduciary duties to remaindermen; the case was remanded for further proceedings to address the alleged breaches.


Jacob v. Davis, 738 A.2d 904 (Md. Ct. Spec. App. 1999)