Trust beneficiaries’ rights to information [March 2010]

How much information should beneficiaries under a trust be given, and what information are they entitled to? In many trusts the settlors and trustees are Mum and Dad and the beneficiaries are the children. Usually the children are kept informed and advised of the assets in the trust informally and the so question as to what information should be disclosed to the beneficiaries is not often an issue.

Questions may arise as beneficiaries get older or where communication between trustees and beneficiaries is limited or has broken down. The beneficiaries may become suspicious of the actions of the trustees and demand financial statements and other financial information from them.

Trustees are not legally required to show beneficiaries all Trust documents, although in many cases trustees will for example supply a copy of the Trust Deed, information and explanation as to investments, financial statements and accounts of the Trust.

Historically it was thought that a beneficiary under a fixed trust ("fixed beneficiary") had an entitlement to view trust documents and information, and a beneficiary under a discretionary trust ("discretionary beneficiary") did not. Under a fixed trust the number of beneficiaries and the share they will receive are defined. Under a discretionary trust the trustees may use their discretion as to who will be a beneficiary and what share a beneficiary will receive. The reasoning therefore was that a fixed beneficiary has an entitlement to Trust property, whereas a discretionary beneficiary merely has the right to be considered as a beneficiary.

In Schmidt v Rosewood Trust Ltd the Privy Council held that a beneficiary's entitlement to seek disclosure of trust documents is based on the Courts' inherent jurisdiction to administer Trusts rather than whether the beneficiary is a fixed beneficiary or a discretionary beneficiary. Both fixed and discretionary beneficiaries can apply to the Court for disclosure of Trust documentation.

Where a beneficiary applies to the Court for disclosure of a Trust's documents, the Courts will, in exercising their discretion, balance the interests of trustees, beneficiaries and third parties. The beneficiaries do not have an absolute right to information. The Court will consider the nature of the information and the interests of all the beneficiaries.

Information which the Courts have in the past provided to beneficiaries include:

• copies of the Trust Deed,
• financial accounts and statements of the Trust,
• any Deeds of Variation of Trust Deed, and Deeds of Retirement and Appointment of Trustees,
• valuations of assets of the Trust, and
• legal opinions related to beneficiaries rights and the interpretation of a Trust Deed's provisions.

In exercising their discretion, the Courts will consider such factors as issues of personal and commercial confidentiality and sensitivity, whether limitations need to be placed on the use of the documentation or information, whether some documents should be withheld in full or in part, and what impact the disclosure will have on the trustees, the beneficiaries or third parties. For example, the Trustees' reasoning behind their decisions will not be required to be disclosed.

There will no doubt be times when a trustee will refuse a beneficiaries' request for trust information. This decision is more likely to be respected and accepted where the trustee and beneficiary have developed a history of communication and respect. As trustee, if you are unsure as to what type of Trust information you need to disclose to the beneficiaries, we recommend you seek legal advice before you respond to any request.

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