Changes to trust law allowing all beneficiaries access to family trust details now has its expected consequence; a family trust in court asking certain beneficiaries be excluded from any distributions and details of court proceedings supressed and kept secret.
A 1980s Wellington family trust was first. As part of the court suppression order, it was given a fictitious name: Ruby Trust. Parents set up the trust to hold business assets; beneficiaries being their two daughters along with their spouses and children plus extended family members. Trustees have a wide discretionary power to allocate income and capital between beneficiaries.
The High Court was told one daughter disputed decisions made by trustees. Deep divisions developed between members of the immediate family as to how Ruby Trust was operated. The daughter sued. All this took place outside the knowledge of extended family members who did not know they were also Ruby Trust beneficiaries. As a further complication, two other family trusts were tied in with Ruby Trust. After detailed discussions and negotiations between the one surviving parent and members of immediate family a proposal was hatched to deal with Ruby Trust assets: fifty per cent of all future distributions were to go to one daughter and her immediate family; forty per cent to a second daughter and her immediate family; and ten per cent to the surviving parent with this share going to the second daughter by default if she was no longer alive at time of distribution. The deal required all extended family beneficiaries be cut out of any future distributions. They did not know of the deal being arranged.
In the High Court, Justice Gendall gave judicial blessing to the arrangement. The agreement finalised a bitter family dispute between members of the immediate family, enabling them to get on with their lives. The effect of deleting extended family beneficiaries was minimal, Justice Gendall ruled. They did not know they were beneficiaries. Trustees were not expected to make trust distributions to them in any event. When setting up Ruby Trust, the parents signed a ‘memorandum of wishes’ indicating they intended members of immediate family be primary beneficiaries.
re Ruby Trust – High Court (17.02.22)
22.037