THE TRUSTS ACT – WHAT TRUSTEES NEED TO KNOW Part 2 – Disclosure of trust information to beneficiaries

One of the most significant requirements introduced by the Trusts Act 2019 (the Act) is the presumption that trustees will make basic trust information available to every beneficiary of the trust. The purpose of this is to ensure that beneficiaries have sufficient information to enforce the terms of the trust and hold the trustees to account.

A beneficiary is defined by the Act as any person who has received, or who will or may receive, a benefit under a trust (other than a trust for a permitted purpose), and includes a discretionary beneficiary. The definition provides that the class of beneficiaries entitled to seek trust information is not limited to the current beneficiaries of a trust.

Trustees are required to consider disclosing basic trust information at reasonable intervals, once every 12 months at a minimum. The “basic trust information” is:

• the fact that the person is a beneficiary of the trust;

• the name and contact details of all the trustees;

• the occurrence of, and details of, each appointment, removal and retirement of a trustee as it occurs; and

• the right of the beneficiary to request a copy of the terms of the trust or trust information.

There is a further presumption that if a beneficiary requests any trust information, including a copy of the trust deed or financial statements for the trust, then the trustees must provide that information within a reasonable time. This information does not include the reasons for the trustees’ decisions.

Section 53 of the Act sets out the factors which trustees must consider in deciding whether the presumption applies, and if disclosure should or should not be made:

• the nature of the beneficiary’s interest in the trust, including the likelihood of the beneficiary receiving a benefit in the future;

• whether the information is subject to personal or commercial confidentiality;

• the expectations and intentions of the settlor at the time the trust was created as to whether the beneficiaries as a whole and the beneficiary in particular would be given information;

• the age and circumstances of the beneficiary and of the other beneficiaries of the trust;

• the effect of disclosure on the beneficiary, the other beneficiaries, the trustees and third parties;

• the effect of disclosure on relationships within the family and the relationship between the trustees and some or all of the beneficiaries to the detriment of the beneficiaries as a whole;

• in a trust that has a large number of beneficiaries or unascertainable beneficiaries, the practicality of providing information to all beneficiaries or all members of a class of beneficiaries;

• the practicality of imposing restrictions and safeguards on the use of the information or subject to redactions;

• if a beneficiary has requested information, the nature and context of the request; and

• any other factor that the trustee reasonably considers is relevant to determining whether the presumption applies.

Once these factors have been considered, the trustees may decide to make disclosure. The Act does not require this to be made in any particular form, however we suggest this be prepared in a letter to each beneficiary, so you have a written record. We also recommend records be kept demonstrating all the relevant factors have been considered in reaching a decision on disclosure.

We recommend seeking legal advice before deciding to refuse disclosure as the Act provides that if no beneficiaries receive any trust information for a period of more than 12 months, the trustees must apply to the Court for directions.

Given the Act came into force on 30 January 2021 and there is a 12 month timeframe for compliance, if you have not already consulted your lawyer regarding your disclosure obligations, we recommend doing so as soon as possible. We can advise you on the disclosure decision-making process and assist you to prepare an appropriate letter to beneficiaries so you will not be in breach of the Act.

Part 3 of our series on the Trusts Act sets out the core trust documents which trustees are required to hold.

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

For more information, please contact: Chantel Goodman; chantel@k3.co.nz or 03661366.

READ PART 1 HERE: http://blog.k3.co.nz/amendments-to-the-trust-act-what-trustees-and-beneficiaries-need-to-know