What information do trustees need to provide to beneficiaries under the Trusts Act 2019?

New Zealand’s new trusts legislation, the Trusts Act 2019, came into force on 30 January 2021.

One aspect of the Act that some clients find concerning is the ways that beneficiaries can receive information about a trust. We set out below an explanation of what the information provisions are and what trustees should be doing to comply with their duties under the Act.

Do trustees need to provide information to beneficiaries under the Act?

Under the Act, there is a presumption that “basic trust information” should be disclosed to beneficiaries of the trust. Basic trust information is:

• informing each beneficiary that they are a beneficiary of the trust;
• the trustees’ name and contact details;
• the occurrence of, and details of, each appointment, removal and retirement of a trustee as it happens; and
• the right of the beneficiary to request a copy of the trust deed or trust information.

The Act also creates a second presumption that if a beneficiary asks for “trust information”, the trustee should provide it. Trust information is any information regarding the terms of the trust, the  administration of the trust or the trust assets that is reasonably necessary for the beneficiary to have to enable the trust to be enforced. This could include, for example, copies of the trust accounts. It does not include reasons for trustees’ decisions.

The purpose of these provisions in the Act is to ensure that beneficiaries have enough information to check that the terms of the trust and the trustees’ duties are being met correctly and trustees are not breaching their duties. However, a balancing act is required to make sure that information is given in appropriate circumstances. For example, sufficient information should be provided to allow intervention if a trustee is using the trust fund incorrectly but not so much information that it creates disharmony between family members.

Is providing information to beneficiaries mandatory?

The sections regarding the provision of trust information to beneficiaries under the Act create presumptions, not requirements. The Act acknowledges that it may not always be appropriate to provide information and so both presumptions can be rebutted if that is appropriate in the circumstances.

Before providing any information, trustees should consider all of the factors set out in section 53 of the Act. If, taking these factors into account, the trustees reasonably consider that information should not be provided then the presumption does not apply and the trustees can withhold information from one or more of the beneficiaries. This applies to both presumptions.

What factors must trustees take into account when deciding to disclose information?

The factors that trustees must consider are:

• the nature of all beneficiaries’ interests in the trust, including the degree and extent of the beneficiary’s interest in the trust and the likelihood of the beneficiary receiving trust property 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 set up (if known) on disclosure;
• the age and circumstances of all of the beneficiaries;
• the effect on all of the beneficiaries, the trustees and third parties if information is provided;
• in the case of a family trust, the effect of giving the information 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;
• the practicality of giving information;
• the practicality of imposing restrictions and other safeguards on the use of the information;
• the practicality of giving some or all of the information to the beneficiary in redacted form;
• 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.

‍What happens if trustees don’t disclose?

If trustees decide not to provide the basic trust information to any beneficiary, or if the trustees refuse a request from a beneficiary for trust information, then trustees need to apply to Court for directions on whether this is reasonable and to consider alternative means by which the trustees can be held accountable and ensure the trust is enforced.

Trustees do not need to make this application if, within a twelve month period following any refusal, at least one beneficiary has received basic trust information.

The Act emphasises that it should only be in exceptional circumstances that trust information is withheld from all of a trust’s beneficiaries.

What should trustees be doing now?

Given the Act is now in force, trustees should be creating processes to consider which beneficiaries should receive basic trust information and what steps they should take if further trust information is requested.  

Trustees should consider who the beneficiaries of the trust are and whether the trustees have sufficient information about the beneficiaries to consider the factors set out in section 53 of the Act and, if not, try to obtain this information. Trust deeds should also be reviewed to consider any disclosure requirements in the deed.

Trustees should be proactive by preparing letters providing the basic trust information and sending these out now.  

For more information about providing information to beneficiaries or the new Trusts Act, contact Morris.