Trustee Considerations for Disclosure – Whether and What to Disclose
About the Authors:
Alison Gilbert
Partner at Brookfields Lawyers
Alison provides specialist legal advice on the structuring and management of estates and trusts, advising trustees and beneficiaries on trust and estate disputes, relationship property and elder law.
Polina Kozlova
Solicitor at Brookfields Lawyers
Polina advises on trusts, estates, relationship property and assists the litigation team with matters that involve disputes in those areas. Polina is fluent in Russian.
Angela Wong
Senior Legal Executive-Associate at Brookfields Lawyers
Angela is a Senior Registered Legal Executive (Associate). With property background, she is experienced in trusts and estates planning and administration, overseeing investments of trusts funds and PPPR property management.
In our previous article on trustees’ disclosure to the beneficiaries we summarised the requirements of the Trusts Act 2019 (“the Act”) in relation to disclosure. This article is designed to provide trustees with more guidance on how they should approach disclosure to beneficiaries.
There is a presumption in the Act that the trustees must disclose basic trust information to every beneficiary or representative of a beneficiary and trust information to beneficiaries who request it.
However, the Act also requires that before the trustees provide either basic trust information or trust information to beneficiaries, the trustees must consider a range of factors as set out in section 53 of the Act (“s53 factors”).
Basic Information
The basic trust information is:
The fact that a person is a beneficiary.
The name and contact details of the trustees.
The occurrence of, and details about, any change to the trusteeship.
The right of a beneficiary to ask for a copy of the trust deed or trust information.
If the trustees reasonably consider, after taking into account the s53 factors, that the basic trust information should not be made available to every beneficiary the trustees may decide to withhold some or all of the basic trust information from one or more particular beneficiary or class of beneficiary.
There is an obligation on the trustees to make an active decision as to whether the basic trust information is made available. This decision should be recorded in a comprehensive trustee resolution detailing the matters the trustees considered in making their decision.
The obligation to make the basic trust information available is an ongoing one. The trustees are required to consider at reasonable intervals whether they should be making the information available.
Disclosure of Trust Information on request by a beneficiary
The presumption under the Act is that the trustees must within a reasonable period of time give a beneficiary or a representative of a beneficiary the trust information requested.
However, if the trustees decide, after taking into account the s53 factors, that the information should not be given to the beneficiary the trustees may decide to refuse the request for trust information.
It is the trustees’ task to ascertain what the consequences will be if information is or is not released. Release of information might lead to family disharmony or Court proceedings but so can the non-release of information.
The trustees’ deliberations in making their decision should be recorded in trustee resolutions. Trustees do not have to give beneficiaries the reasons for their decisions concerning the trust. However, these reasons may be discovered in Court proceedings.
Trustee knowledge
The trustee consideration of the s53 factors is fact specific: relating to the specific trust and the specific beneficiary of that trust. The trustee in deciding on disclosure needs to know:
Why was the Trust originally created? What were settlor’s expectations about distributions from the trust – who and when? Was a Memorandum of wishes signed when the trust was created?
The trust deed/ instrument. Is the trust fixed or wholly discretionary? What are the terms of the trust regarding information disclosure? What are the beneficiary categories? What is the difference in the trustee discretions between, for example, Discretionary, Final, Default, Secondary or Primary beneficiaries in distributing trust property?
Who is included in each beneficiary category? Are the beneficiaries named or a specific class? For example, “any trust settled by the settlor”? Who fits into this class? Is it likely they will receive trust property?
What is the circumstance of each potential beneficiary: their age, occupation, financial position, health, do they have a partner, do they have children, are they involved in the family business, do they own a home?
Family dynamics – is the family close, are there estranged family members, status of partners?
What assets are held in the Trust – the settlor’s home, closely held family business, diversified portfolio, commercial properties? What are the trust liabilities – loans from the settlor, commercial loans?
Over the 18 months since the Act was passed, many trustees upon undertaking this detailed review have determined that the trust no longer serves the purpose for which it was originally established and have decided to wind up the trust.
Section 53 Factors
The factors to be considered by the trustees when deciding whether information should be disclosed to beneficiaries include:
the nature of the interest held by the beneficiary and the likelihood of them receiving trust property;
whether the information is confidential;
the expectations and intentions of the settlor on establishment of the trust as to whether beneficiaries would be given information;
the beneficiaries’ ages and circumstances;
the effect on the beneficiary of giving the information;
for a family trust the effect of giving information on – the relationships within the family: the relationship between the trustees and some or all of the beneficiaries to the detriment of the beneficiaries as a whole;
the effect on the beneficiaries and third parties, of giving the information,
if a trust has many beneficiaries, whether it is practical to give information to all beneficiaries;
the nature and context of the information request;
whether it is practical to place restrictions or safeguards on how the beneficiaries can use the information or to redact some of the information
The Act comes into force on 31 January 2021. As a result of this legislative change the trustee role has become even more onerous. It will be important for trustees to work closely with their lawyer to ensure compliance with trustee obligations and duties.
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