The Trusts Act 2019 ("the Act") outlines the obligations of trustees in managing family trusts. Information disclosure requirements to beneficiaries are significantly more demanding than previously applied.
Types of Information to be Disclosed
The Act distinguishes between "basic trust information" and "trust information", but there is a presumption that both shall be disclosed to every beneficiary as follows:
Basic trust information (s 51) refers to a baseline level of information to be disclosed to every beneficiary:
1. The fact that they are a beneficiary of the trust;
2. The name and contact details of all trustees;
3. The occurrence of and details of any changes in trustees as they occur; and
4. The beneficiary may request a copy of the terms of the trust or trust information.
Basic trust information should be made available to all beneficiaries, even if not specifically requested, and trustees must consider ongoing disclosure "at reasonable intervals". We believe a best practice approach would be an annual revision.
Trust information (s 52) disclosure is significantly broader but is only required upon the request of the beneficiary. It includes any information:
1. Regarding the terms of the trust, the administration of the trust, or the trust property; and
2. That is reasonably necessary for the beneficiary to have to enable the trust to be enforced, but specifically excludes reasons for trustees decisions.
Trust information should be provided within a reasonable period of time of being requested.
Reasons for Non-Disclosure of Trust Information to Beneficiaries
Before making any disclosures, the trustees must consider the legislated factors to determine if disclosure should be made to some/all beneficiaries. Factors include (s 53):
1. The nature of the beneficiary's interest in the trust fund;
3. The settlors' intentions and expectations.
4. The age and circumstances of the beneficiary and other beneficiaries;
5. The likely effect of disclosure on the beneficiary and third parties, including relationships within the wider family;
6. Practicalities of disclosure; and
7. Anything else the trustees believe is relevant to decide whether disclosure is necessary.
Once these factors are considered, if the trustees reasonably consider that trust information should not be given to certain beneficiaries, they may resolve and refuse to do so. This decision should be recorded in writing.
Involvement of the Court
There are broad powers of the Court to intervene, if necessary, upon request of the trustees or beneficiaries. Legal advice is highly recommended in either situation.
Trustees must, therefore, regularly consider their disclosure obligations to all beneficiaries of a trust and would be well served by recording their decisions in writing. Trustees and beneficiaries need to be aware of their rights and obligations to minimise the risk of a dispute and the complexities and costs of litigation.
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Written by Brandon Cullen and Hamish Coupe
© McVeagh Fleming 2022
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.