You’re a Trust Beneficiary: What’s Next?
As a trust beneficiary, you have certain rights. However, trusts can take many forms and may be governed by unique provisions established by the creator of the trust or grantor, so details will vary.
First, if you are a beneficiary, it’s important to know what kind of trust you’re named in. If it’s a revocable trust, that means the grantor can change or revoke it at any time. In this case, you as beneficiary have very few rights — grantors may even change beneficiaries.
However, beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. If you are a current beneficiary, you’re entitled to income from the trust; as a remainder or contingent beneficiary, you have an interest in the trust after the current beneficiaries get their take.
State law and the terms of the trust determine what rights you as a beneficiary have, but there are five common rights given to beneficiaries of irrevocable trusts:
- Payment — Current beneficiaries have the right to distributions as set forth in the trust document.
- Right to information — Current and remainder beneficiaries have the right to information about the trust and its administration with enough detail for them to know how to enforce their rights.
- Right to an accounting — Current beneficiaries are entitled to a detailed report of all income, expenses and distributions from the trust — a full accounting. Usually trustees are required to provide this accounting annually, but provisions may vary.
- Remove the trustee — Current and remainder beneficiaries have the right to petition the court for the removal of the trustee if they believe the trustee isn’t acting in their best interest. Trustees have an obligation to balance the needs of the current beneficiary with the needs of the remainder beneficiaries, even though that can be difficult to manage.
- End the trust — In some circumstances, if all the current and remainder beneficiaries agree, they can petition the court to end the trust. State laws vary on when this is allowed. Usually, the purpose of the trust must have been fulfilled or be impossible.
As a trust beneficiary, you may feel you’re at the mercy of the trustee, but you have rights to ensure that the trust is properly managed. In addition to regular accounting of trust assets, beneficiaries have a right to request a special accounting from the trustee if there is a reason to suspect a problem. Beneficiaries have the right to file a petition with a local probate court to remove the trustee and request a replacement.
Being named a beneficiary of a trust is a welcome event, but not without its complications. If the job is handled improperly, unfortunate consequences will ensue. It may be wise to engage the services of an experienced trust attorney to make sure your rights are protected.
Estate planning is complicated and ever-changing. The best advice? Consult your accountant, attorney, financial planner or insurance representative to get the planning advice you need for your specific situation. Contact us today if you’d like us to point you in the right direction.
Remember: state law often governs these documents. Thus, it is important to get advice from an expert who understands the laws in your area.
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