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Trust Documents - What Do You Have To Disclose?

If you are a trustee of a Trust, you may receive a request from a beneficiary or other interested person to disclose certain Trust documents.  Whether or not you are required to disclose the documents requested depends on the nature of the document and the circumstances.

Often, modern Trust documents and Letters or Memoranda of Wishes state that the terms of the Trust Deed, details of the Trust property, the accounts of the Trust and any other information relating to the Trust or its administration, are at all times confidential to the trustees and their advisors.  This, notwithstanding the fact that a line of Court decisions has made it reasonably clear that the trustees would be bound nevertheless to provide an adult beneficiary with a copy of the Trust Deed and latest accounts.

Whether or not a Memorandum or Letter of Wishes has to be disclosed is more difficult.  A Memorandum or Letter of Wishes is the document prepared by the settlor which discloses reasons upon which the trustees are asked to base their discretion.  Most modern Trust Deeds are in a discretionary form and the Memorandum or Letter of Wishes is therefore an important document. 

The Courts have said that potential beneficiaries of a Discretionary Trust have the same rights with respect to the disclosure of Trust documents and information as beneficiaries who have fixed interests under Trusts.  The entitlement to seek disclosure of Trust documents is not based on the existence of a fixed and transmissible proprietary interest in the Trust property (which discretionary beneficiaries do not have) but on the Court's inherent right to supervise the administration of all Trusts and to ensure the accountability of their trustees.

Beneficiaries of Discretionary Trusts, like all beneficiaries, do not have an absolute entitlement to disclosure of documents and information.  The Court after reviewing all the circumstances may refuse to grant disclosure of Trust information to an applicant if to do so would be against the interest of all beneficiaries, would compromise the confidentiality of third parties or where the applicant's claim to a trust benefit is little more than a theoretical possibility.

Where then does this leave trustees?  Clearly, Trust Deeds and accounts are documents which adult beneficiaries are entitled to.  Memoranda or Letters of Wishes expressed to be confidential to the trustees, may be discloseable although this will depend on the circumstances.  Minutes of trustee meetings and decisions should not be disclosed.

A beneficiary has a right to have his or her circumstances considered and provided the trustees have considered these and cannot be held to have acted capriciously, their decision will not be questioned by the Courts. 

For more information on this topic, please contact Tony Fortune or Cathy Fisher.

August 2011





Contact

Tony Fortune

Partner
DDI: (+64 9) 915 2405
E: tony.fortune@fortunemanning.co.nz

Cathy Fisher
Partner
DDI: (+64 9) 915 2412
E: cathy.fisher@fortunemanning.co.nz
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