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Access to Trust Information - What Can Beneficiaries See?

25 November 2014

Many people are beneficiaries in trusts. If you know you are a beneficiary in a trust you might like to know you are being treated properly. What information can you see to check this?

Beneficiaries don’t “own” a trust so they don’t have a right to all information relating to trust affairs. However trustees have to be accountable to beneficiaries – while beneficiaries don’t own the trust, they do receive the benefits so have a right to make sure those benefits are not being squandered or mishandled by the trustees. To ensure trustee accountability beneficiaries are entitled to access “trust documents”.

 

So what are “trust documents”?

There is no absolute definition of what “trust documents” are. This is a blessing and a curse. A curse because there is no quick and easy answer when an issue arises; a blessing because flexibility is needed as each trust is different and documents needed to hold trustees accountable can vary greatly.

Generally trust documents include all information which is the property of the trust which relate to the getting in, administration, management and distribution of the trust. This can be easier to understand in terms of what are not “trust documents”:

(a) Information which is not for the purposes of the getting in, administration, management and distribution of the trust but is for the trustees’ own purpose even if such information relates to the trustees’ discharge of his or her duty as a trustee;

(b) Information supplied to or by the trustee on a confidential basis;

(c) Information relating to the exercise of a discretion by trustees (unless there is an allegation of impropriety on the part of trustees). Many trusts are discretionary trusts and beneficiaries are discretionary beneficiaries. This means that any distribution to these beneficiaries is at the discretion of the trustees.

(d) Information which may indicate the reasons for the exercise of the trustees’ discretion or information concerning particular beneficiaries; and

(e) Legal advice given to the trust or trustee in relation to litigation between the trust and beneficiaries.

 

Shouldn’t beneficiaries be able to know why a discretion has been exercised?

Beneficiaries may feel entitled to know why a discretion has been exercised the way it has, particularly if they feel it has not gone in their favour. In a discretionary trust the trustees are entitled to make whatever decision they see fit (within the limits placed on them by the trust deed).

There are good reasons for ensuring trustees can exercise their discretion confidentially, from making sure trustees can make the best decision for the trust without undue influence from beneficiaries, to maintaining harmony between beneficiaries. Beneficiaries can hold trustees to account in these situations only when there is a claim of improper conduct, not just if they do not agree with a discretionary decision.

 

How does privilege work between trustees and beneficiaries?

The normal concept of legal privilege (where a lawyer’s advice is totally confidential between the client and the lawyer and can’t be used in court proceedings) does not apply to trustees because that advice will usually be in relation to the trust and beneficiaries can access that advice. However during litigation between trustees and beneficiaries, beneficiaries are not entitled to see the legal advice given to the trustees about the litigation. They are still entitled to access all other legal advice, which may at times be relevant to the subject of the litigation.

Gillian Spry

 

Gillian Spry is a Partner in the Litigation & Employment team at Norris Ward McKinnon. Gillian can be contacted at gillian.spry@nwm.co.nz

 

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