10 years seems to the best practice limit in the industry although I accept the Money Laundering rules require that for a relevant person must make and retain orderly records of CDD information for at least 5 (five years) from the end of the relationship with the customer (or the completion of the transaction, for one-off transactions). This information including evidence of identity obtained in line with the requirements of Sections 3 and 4 of the handbook and any customer files and business correspondence relating to the relationship.

Further to these AML rules and company law matters (10 years)  when considering retention of trust documents, trustees should bear in mind any potential claims that could be made as regards the trust; for example, against the trustees or anyone acting in a fiduciary capacity in relation to the trust, and against professionals in their dealings with the trust. The two most likely claims are against the trustees for breach of trust (and limitation periods), or, if the trustees are professionals, against the professional trustee in negligence.   

1. Limitation periods – A breach of trust claim must be brought within six years from accrual of the right of action, i.e. when the breach is committed. The right of action does not accrue until the beneficiary’s interest has vested. Therefore, if the complaining beneficiary is a remainderman, time does not start to run until the life interest terminates. Accordingly, the very latest point that action could be taken against a trustee is likely to be six years from when the last beneficiary’s interest vests or from the end of the trust period. In certain circumstances, this end-point is postponed, for example if there is deliberate concealment, fraud, or mistake whereby the breach could not with reasonable diligence be discovered even at the point of vesting or the end of the trust period. Also, time does not run against a trustee who remains in possession of trust property. Please also note – When the limitation period may not protect you – The standard six year limitation period may not protect you in will related cases where, for example, undue influence is alleged, and note that in Humphreys v Humphreys [2004] EWHC 2201 (CH) a lifetime gift case, there was a successful challenge 13 years after the transaction. Trustees should be aware of the circumstances where the end point could be postponed, as above in the case of concealment, fraud or mistake, but also in cases where a beneficiary is a minor or under a disability, in which case, time does not start to run until the beneficiary reaches a majority, or the disability ceases (s.28(1) of the Limitation Act 1980).
2. Negligence – A negligence claim must be brought within six years from accrual of the right action, i.e. when the damage occurs. Where the beneficiary does not discover the damage until after the six year limitation period, he/she may rely on section 14A of the Limitation Act 1980 which allows a further three years from the date of knowledge (or presumed knowledge). Limitation does not run against a discretionary beneficiary, as not having a proprietary beneficial interest (Armitage v Nurse [1998] Ch. 241. See 7.1.3 Case law). Section 14B of the Limitation Act 1980 provides that a negligence claim will be time-barred after 15 years from the date on which the act or omission constituting negligence occurred, even where the cause of action has not yet accrued. Therefore the very latest point that action in negligence is likely to be taken against a professional involved with the trust is, as with breach of trust, six years from the date of vesting or from the end of the trust period (with the caveat that the claimant may be time-barred as a consequence of the longstop period set out in section 14B of the Limitation Act 1980). Knowledge is likely to be assumed from the date of vesting or the end of the trust period (as appropriate), at that point the claimant is likely to have had the information necessary to have presumed knowledge.

In my experience firms are moving to indefinite record retention policies (using digital retention systems) due to the nature of different retention requirements in overlapping laws, case law investigations, regulatory investigations and the increase in client litigation.   5 years is too short – 10 years could be arguably an industry standard but ultimately a firm need to make a practical decision based on an assessment of the above factors and follow their decision slavishly.