The new Trusts Act 2019 (“the Act”) introduces a presumption that the trustees of a trust must make available “basic” trust information to the beneficiaries of a trust. There are several factors that trustees may take into account when deciding to make this information available to beneficiaries. A second presumption has also been implemented; when a beneficiary requests additional trust information, a trustee must respond within a reasonable period of time with the requested information. Because this applies to every trust in New Zealand, trustees need to ensure that they are familiar with these obligations and presumptions, and that they are followed.
What is “basic trust information”
Basic trust information is:
- That a person is a beneficiary of the trust; and
- The name and contact details of the trustee(s); and
- The 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.
Requirements for trustees
How do I decide whether to provide “basic” information to beneficiaries?
Trustees must consider, at reasonable intervals, whether they should be making basic trust information available to beneficiaries. The Act sets out several factors that trustees must consider when considering whether basic trust information or further trust information should be given, including:
- The nature of the interests in the trust held by the beneficiary and other beneficiaries, including the degree and extent of their interests and the likelihood of the beneficiary receiving trust property in the future;
- Whether the information is personally or commercially sensitive;
- The expectations and intentions of the settlor (person who set up the trust) at the time of the creation of the trust as to whether or not beneficiaries should be given information;
- The age and circumstances of the beneficiary and other beneficiaries;
- The effect on the beneficiary, other beneficiaries, trustees and third parties of providing the information;
- In the case of a family trust, the effect of giving information on relationships within the family and relationships between the trustees and beneficiaries, and whether such effects will be to the detriment of beneficiaries as a whole.
- If there are a large number or unascertainable beneficiaries, the practicality of giving information to all beneficiaries;
- The practicality of imposing restrictions and other safeguards on the use of the information;
- The nature and context of the request for information; and
- Any other factors the trustees reasonably consider relevant.
Trustees should be very cautious if they decide to withhold basic trust information from every beneficiary. The Act states that this may only be done in “exceptional circumstances”. The Act also requires the trustees to apply to the High Court to review their decision. This is to ensure that withholding basic information from everyone is reasonable in the circumstances. This is a legal requirement, and trustees should carefully consider taking this step, as applications to the High Court are expensive, time consuming and may not be accepted by the Court unless there are truly exceptional circumstances.
However, this does not mean that “basic” trust information needs to be provided to every beneficiary. So long as some beneficiaries have this information, others can be excluded if the trustees decide, and refer to the factors discussed above.
What about when beneficiaries request other information about the trust?
Beneficiaries who request further trust information from trustees benefit from the presumption that they will be provided this information within a reasonable time frame. “Further trust information” refers to anything from what the terms of the trust are, to the contents of the trust or who the other beneficiaries are. Trustees do not have to give this information to beneficiaries, so long as they make that decision in light of the factors mentioned above. The exception is when no beneficiaries have any trust information. If a beneficiary makes a request for trust information in these circumstances, then any trustee who declines that request is required by the Act to apply to the High Court to evaluate their decision.
Given these new obligations the Act has created for trustees, it is a good idea to check who the beneficiaries of your trust are, as they are all entitled to benefit from these new presumptions. Many settlors settled their trusts prior to the Act’s existence, and included their children, grand-grandchildren, great grandchildren and spouses as classes of beneficiaries. Trustees should consider (if their trust deed allows) removing some classes of beneficiaries if they do not wish for information to be disclosed to them. Although trustees can still withhold information if they have considered the factors discussed above, they will need to make sure their decision has been made in a reasonable way, as it may end up being evaluated by the High Court.
For further information please contact Mike Gould, Nikki Farrell or Conor Lenon.