Latest News [index] Beneficiary Rights in the Spotlight
The article "Trust Experts predict chaos if proposal goes ahead" (Sunday Star Times, July 31), raises some interesting questions about the rights of beneficiaries and the obligations owed to them by trustees.
By way of background to this article we refer to the Law Commission's Fourth issues paper on the Review of Trusts, which has asked a number of questions around the right beneficiaries have to information and how these rights should be managed by trustees.
In the article a lawyer expressed the view that "the less beneficiaries are involved" the better "so the trustees can actually do their jobs without the beneficiaries questioning them all the time".
While this is a practical proposition from a trustee's perspective, it presupposes that the trustee appreciates the obligations inherent in the role of trustee and actually is getting on with the job. After all, trustees only exist for the benefit if the beneficiaries.
From the beneficiary's perspective, in the absence of information there is room for suspicion and doubt on the part of the beneficiary.
In the fullness of time the Law Commission will report back on the results of its comprehensive consultation process and likely a new Trustee Act will result. However, perhaps it is time for a more reasoned approach to trusts from the supply side of the equation.
It is widely accepted that there are more trusts per head of capita in New Zealand than anywhere else in the world. Why this is the case is not clear. Most recent estimates suggest there are as many as 400,000 trusts in New Zealand controlling an estimated $93 billion of wealth.
Although these numbers are significant, if the 400,000 figure is correct the average value of assets controlled by any one trust is not much more than $200,000 (or about 40% of the value of the average house in Auckland). Where a trust's primary asset remains a family home (or part thereof), perhaps a greater consideration of risk versus reward is required.
It has been suggested that any legislated obligation to provide accounts could be watered down where a family home is a trust's sole asset. A better approach might be for the settlor of a modest trust to reconsider how the trust should be managed.
If a professional trustee is used in the place of inexperienced settlor trustees, there may be no need to keep beneficiaries in the dark so that the trustees can get on with their job. Perhaps, the biggest issue with trusts has been the perceived need for secrecy and silence allowing the development of mistrust and suspicion.
Conceivably trusts managed in an open and transparent fashion by experienced trustees might provide a better solution than anything legislation might provide.