Are you a beneficiary wondering what trust information you are entitled to, or a trustee concerned with what information you may be required to provide to a beneficiary? This article considers the current New Zealand legal position on the rights that beneficiaries have to trust information, and the changes that will result from the new Trusts Act, which was passed into law this year (2019).
In the past, it has often been the case that only the trustees knew about the family trust “secret”. The new Trusts Act dramatically changes this from 30 January 2021 by developing further the current legal principles established in the following 2 cases:
Erceg v Erceg
This 2016 Supreme Court case involved the estate of Michael Erceg, a beer magnate who died in a helicopter accident. The Court said that the trustees of a trust must give beneficiaries certain basic trust documents on request to ensure that a trust is administered properly and the trustees are held accountable for their actions. Ultimately, the ability to see trust information is based on the status and motives of the beneficiary applying to the Court. In this case, the Court refused to grant Ivan Erceg’s request for trust information because his conduct toward the other beneficiaries was confrontational and “he was on a fishing expedition”. However, as a primary beneficiary of the Accorn Foundation Trust, he would otherwise have had a good case for receiving basic trust documents, comprising:
- The trust deed;
- Any variations to the trust deed;
- Financial statements; and
- Potentially minutes of meetings/resolutions, but with reasons deleted.
Addleman v Lambie Trustee Limited
In this 2019 Court of Appeal case, Mrs Addleman was both a discretionary and a final beneficiary of her father’s Lambie Trust, along with her estranged sister, whose company Lambie Trustee Limited was the Trust’s sole trustee. Mrs Addleman only became aware of the Trust’s existence when she received 4.25 million as a “full distribution of funds” from the Trust. Wanting to know more, she initially requested comprehensive information about the Trust from its inception 12 years earlier.
Applying the principles established in Erceg above, the Court said that as a close beneficiary of the Trust Mrs Addleman was entitled to see trust documents, albeit within a narrower category than those she initially requested, and that she should receive the following:
- Financial Statements;
- Minutes of meetings, but without reasons for trustee decisions; and
- Any legal opinions and other advice obtained by the trustees which was funded by the Trust.
New Trusts Act Changes
The new Trusts Act significantly changes the rights of beneficiaries to trust information. While trusts were once allowed to more easily remain a secret, under the new Trusts Act trustees must disclose basic information to at least one beneficiary without a request being made. This is the Presumption of Notification.
It is important to note that there is a second presumption created by the new Trusts Act, which requires a trustee to provide additional information within a reasonable time to a beneficiary who requests it. This is the Presumption of Disclosure.
What is “basic trust information” under the new Trusts Act?
Basic trust information is the information that tells you about the trust – what its purpose is, who the parties to the trust are, etc. It includes:
- The fact that you are a beneficiary;
- The names and contact details of trustees;
- Details of each appointment, removal and retirement of a trustee as it occurs; and
- The right to request a copy of the trust deed and additional information about the trust’s administration and its assets (but not reasons for trustees’ decisions).
However, as can be seen from the following, these two presumptions may be totally or partially ignored. Trustees can rely on numerous factors to deny beneficiaries this basic trust information, such as:
- The nature and interests in the trust held by both the beneficiary applying for information and the other beneficiaries of the trust;
- The age and circumstances of the applicant and the other beneficiaries;
- The effect of giving the information on all related parties;
- The practicality of giving the information;
- The nature and context of the request;
- Any other factor that the trustee reasonably considers.
Differences between the current Erceg Approach and the new Trusts Act
In the Erceg case, the Court said that although a primary or close beneficiary can ask for, and expect to receive, basic trust information on request, they’re not automatically entitled to it. Disclosure will depend on the wider interests of all beneficiaries as a whole. So currently, there is no Presumption of Disclosure.
However, the Trusts Act goes further than the Erceg case and ensures that at least one beneficiary must receive basic trust information on request (Presumption of Disclosure), but also, even if none has been requested (Presumption of Notification). This is to ensure that the trustees are kept accountable and are discharging their obligations to the beneficiaries properly.
If the trustees believe that one or more of the above factors justifies their denying such information from all beneficiaries for more than 12 months, then they must apply to the High Court for directions. The Court then decides if the trustees’ decision is reasonable and if so, how they can otherwise be held accountable for their actions if none of the beneficiaries are advised of their status or informed of basic trust information. Applying to the Court can be avoided if such information is disclosed to at least one beneficiary.
In summary, under the New Trusts Act, as a beneficiary, you can expect to see the trust deed, names of the current trustees and some financial information unless the trustees consider otherwise under the above list of factors.
When the new Act is fully operative, be aware that the obligations of trustees, and in particular the rights of beneficiaries, are set to dramatically change, as may the dynamics of some family relationships.
Every situation is unique, so please discuss your particular case with a professional advisor who can provide a tailored solution to you.
Pat Rotherham – firstname.lastname@example.org