The purpose of this article is to provide an overview of the rights of a beneficiary to request and receive information relating to a discretionary trust. It is based on New Zealand trust law and trust case law as New Zealand is one of the world’s leading trust jurisdictions.
How Do You Know That You Are A Beneficiary?
The trustee of a discretionary trust has no obligation to tell you if you are a beneficiary of the trust. However, if you suspect that you may be a beneficiary then you can ask the trustee. The trustee is then obliged to answer correctly and tell you whether or not you are a beneficiary. Failure to answer truthfully would be a breach of trust on behalf of the trustee.
Request A Distribution From The Trust
Once you have established that you are a beneficiary, you have the right to ask the trustee for a share of the trust assets or income. However, as it is a discretionary trust, it is at the discretion of the trustee as to whether you are given anything. The trustee is obliged to consider all beneficiaries but is not obliged to make distributions to every beneficiary.
Beneficiaries’ Right To Trust Information
A beneficiary has the right to ask a trustee for the following information:
- the trust deed and any deeds of variation
- the trust’s accounts
- contact details for the trustee and any former trustees
- documents relating to the appointment or removal of trustees
- details of all distributions and the recipients of the distributions
- full details of the trust’s assets and liabilities
- documents relating to the winding up or resettlement of the trust if the trust was wound up or resettled.
Under section 83A of the Trustee Act 1956, a solicitor or accountant authorised in writing by a beneficiary shall have the right to examine the accounts, securities and documents of title of a trust that is managed by a trustee corporation and the related books and vouchers (but not the file).
Where a trustee refuses to provide information requested by a beneficiary, the beneficiary may apply to the Court for assistance. As demonstrated by the court’s decision in Erceg V Erceg, the amount of information to be provided to the beneficiary and method by which it is provided is context-dependant. For example where there are indications that the trust is not being managed properly by the trustees, it is more likely that the courts will rule in favour of the beneficiaries.
Review Acts and Decisions of a Trustee
A beneficiary may apply to the court under section 68 fo the Trustee Act 1956 to have the actions and decisions of a trustee review by the court if they feel that they were aggrieved by an action or decision or will be aggrieved by an anticipated action of decision by a trustee.
Information Not Available To Beneficiaries
Trustees are not obliged to provide the following information to beneficiaries:
- the deliberations by the trustees when deciding to vary, partially distribute and resettle a trust
- the trustee’s existing policy in regard to distributions to beneficiaries
- details of advice given by the settlor to the trustee (a beneficiary may apply to the court for release of a Letter of Wishes if one exists)
Trustees must consider the interests of all beneficiaries and act in the best interests of the beneficiaries as a whole. It is important to find a balance between satisfying the request of a beneficiary while also protecting the interests of the other beneficiaries. This is made much easier and disputes can be avoided by trustees establishing and maintaining good communications with the beneficiaries.