In part 2 of our series on family discretionary trusts in property settlements, we discuss the “duty of disclosure” and the types of trust documents that must be provided in a property settlement. If you missed Part 1, you can read it here.
The Duty of Disclosure
In a property settlement, each party is required to provide to the other copies of all information and documents relevant to their financial circumstances. This is known as the “duty of disclosure” and includes any documents relating to an interest either party has in a trust.
This exchange of documents and information is key to identifying the property pool available for division between the separated parties. When assets (whether it be land, a business or other assets) are held in family discretionary trusts, reviewing the documents relating to those trusts enables us to verify what interests the parties hold in a trust, whether a party is in control of a trust, and to gain a clear understanding of what assets the trust holds.
What sort of trust documents need to be disclosed?
All financial documents relating to the trust need to be disclosed, including but not limited to:
- Bank statements for all accounts (transactions and loan accounts) for the 12 months prior to separation to the current date;
- Financial statements (i.e. balance sheet, profit and loss, beneficiaries’ income accounts, depreciation schedules etc) for the past 3 financial years;
- Trust tax returns for the past 3 financial years;
- Trust deeds and any variations to trust deeds;
- Minutes of trustee meetings;
- Company constitution (if there is a corporate trustee of the trust);
- Documents relating to any trust assets acquired or disposed of in the 12 months prior to separation. For example, if a land-holding trust (of which one of the parties is a beneficiary) sold a parcel of land 6 months prior to the couple separating, all documentation relating to that sale would need to be disclosed.
Are third parties required to provide documents?
It is sometimes the case that neither party has the documents in their possession. The documents will be held by a third party such as the family accountant and/or other family members and it is necessary to obtain the documents from those people. We will often write to the family accountant and ask them to provide copies of documents to us.
If the matter is before the Court, it is important to note that the Court has the power to order third parties (e.g. the trustee, family members, accountant, banks etc) to produce documents.
For more information please contact a member of our Family law team at Fox and Thomas.