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Say I cast a Fireball at a white dragon, it definitively knows that the spell cast was a Fireball, with all those flames around...

However, some spells are more subtle, such as Banishment. Maybe the characters want to have about 1 minute to build something that will kill the dragon once it returns... but then it could take casting the Banishment spell (or other spells) many times to successfully sending the dragon on a demiplane for a while.

Yet, if the Dragon (or other target) cannot really know what the spell is, then it could accept a failure thinking it may need its resistance later when it is in a worst situation than at this time...

I have not been able to find something in RAW that says the target knows of the exact spell effects when it has the Legendary Resistance skill. Is there?

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Rules as written

Players Handbook p.202:

Saving Throws

Many spells specify that a target can make a saving throw to avoid some or all of a spell’s effects. The spell specifies the ability that the target uses for the save and what happens on a success or failure.

Everyone can choose to roll a saving throw; the alternative is submitting to the effects of the spell.

Monster Manual p.87

Legendary Resistance (3/Day). If the dragon fails a saving throw, it can choose to succeed instead.

A dragon (and some other creatures) can choose to succeed on a saving throw that it failed; the alternative is submitting to the effects of the spell. The difference is that, whereas the saving throw was "free", choosing to succeed costs the dragon a limited resource.

Finally, there is Player's Handbook p.204:

Unless a spell has a perceptible effect, a creature might not know it was targeted by a spell at all. An effect like crackling lightning is obvious, but a more subtle effect, such as an attempt to read a creature’s thoughts, typically goes unnoticed, unless a spell says otherwise.

If the spell is perceptible, the perception depends on the effects. Once the effects have affected the dragon the saving throw is history. The dragon only knows it was the target of a Fireball because it was engulfed in fire, by the time it has that knowledge it has made its saving throw and chosen to use its legendary resistance (or not) already.

The dragon needs to choose to expend this resource in the absence of knowledge of what the effect will be. You can actually play it that way if you want:

Player: "Elbright the Red, utters the mystic syllables and moves his fingers to the weave. The dragon needs to make a DC 16 Dexterity save."

DM: "Fail, he will use his Legendary Resistance to pass. The cold drake twists aside with supernatural reflexes at the last possible moment; what have you got?"

Player: "A flaming sphere shoots from Elbright's fingers blossoming in a ball of fire around the evil drake. Fireball, 28 damage, half on a successful save.

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Legendary Resistance is a DM tool, not an ability that a monster chooses to use.

I think it's best to treat Legendary Resistance as a game-mechanical way for the DM to make a climactic battle entertaining. A monster with Legendary Resistance doesn't choose whether to use it or not; the DM chooses whether having the monster make a saving throw will make the battle more entertaining or not. It's (presumably) available so that epic monsters that are typically fought solo aren't quickly overcome by a couple of effects that require saving throws.

Consider the similar player-character Inspiration mechanic (PHB, p.126 ). A player chooses when to use an Inspiration die, not their character; it's a mechanic that allows the player to make choices that influences the story they're telling.

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    \$\begingroup\$ As a DM, think I prefer this approach. In essence, it's a rules-sanctioned replacement for fudging the dice rolls, allowing the DM to have a creature shrug off a spell when the plot and drama would benefit from it. Of course, as a player, I'd prefer being able to fool the creature into not using its resistance, but I suspect your interpretation is what the writers intended. \$\endgroup\$ – anaximander Mar 30 '16 at 13:47
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    \$\begingroup\$ Only the text in the MM says If the dragon fails a saving throw, it can choose to succeed instead. — to me that sounds like the dragon chooses and thus it is something it is aware of and not just a game mechanism... \$\endgroup\$ – Alexis Wilke Mar 30 '16 at 21:37
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    \$\begingroup\$ Who "makes the choice" on behalf of the dragon if not the DM, though? \$\endgroup\$ – Vegard Mar 31 '16 at 9:52
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    \$\begingroup\$ @AlexisWilke I wouldn't read it like that. I don't think either pcs or monsters are aware that there are such things as "saving throws", unless you're playing Deadpool in a Marvel campaign or something. \$\endgroup\$ – Cubic Mar 31 '16 at 11:12
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    \$\begingroup\$ @Cubic, there are a few spell that say: The creature can choose to fail its saving throw. So they must be aware of something protecting them, somehow. \$\endgroup\$ – Alexis Wilke Mar 31 '16 at 19:52
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It's not automatic, no. For anyone, figuring out what that person over there is trying to accomplish while waving their hands around and chanting is an Intelligence (Arcana) check:

Your Intelligence (Arcana) check measures your ability to recall lore about spells […]

Since having or remembering the knowledge needed to identify a spell is done by a check, it's not automatic for anyone unless they have an ability that says it's automatic for them. This is true for creatures with Legendary Resistance too.

The fact that a saving throw was required is itself a clue, but if the dragon or what-have-you wants to know precisely which spell was cast so that they can be strategic about their daily uses of Legendary Resistance, they have to a) have observed the casting process and b) succeed on an Arcana check to identify the spell that they observed.

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    \$\begingroup\$ Not sure why this was downvoted. We've had plenty of questions asking "can I identify a spell if I see it being cast?" and the answers given have always said "make an Arcana check". \$\endgroup\$ – anaximander Mar 30 '16 at 10:04
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    \$\begingroup\$ @anaximander: Probably just people strongly agreeing with the other answer, which this one is kind of the opposite to. This answer assumes that Legendary Resistance is a power that the creature is aware of and controls the use of. \$\endgroup\$ – Neil Slater Mar 30 '16 at 20:03

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