5 rights that trust beneficiaries have

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As the beneficiary of a trust, you may feel like you are at the mercy of the trustee, but depending on the type of trust, beneficiaries may have the right to ensure that the trust is properly managed.

A trust is a legal arrangement whereby a person, called a “settlor” or “grantor”, transfers assets to another person (or to an institution, such as a bank or law firm), called a “trustee”. . The trustee holds legal title to the assets for another person, called a “beneficiary”. The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.

If the trust is a revocable trust, that is, the person who created the trust can modify or revoke it at any time, beneficiaries of the trust other than the settlor have very few rights. Because the settlor can change the trust at any time, he can also change the beneficiaries at any time. Often, a trust is revocable until the death of the settlor, and then it becomes irrevocable. An irrevocable trust is a trust that cannot be changed except in rare cases by court order.

The beneficiaries of an irrevocable trust have the right to obtain information about the trust and to ensure that the trustee is acting correctly. The extent of these rights depends on the type of beneficiary. The current beneficiaries are the beneficiaries who are currently entitled to the income of the trust. The remaining or contingent beneficiaries have an interest in the trust after the interest of the current beneficiaries ends. For example, a wife can create a trust that leaves income to her husband for life (the current beneficiary) and then the rest of the property to her children (the remaining beneficiaries).

State law and the terms of the trust determine exactly what a beneficiary’s rights are, but here are five common rights granted to beneficiaries of irrevocable trusts:

  • Payment. The current beneficiaries are entitled to the distributions as set out in the trust document.
  • Right to information. Current and remaining beneficiaries have the right to receive sufficient information about the trust and its administration to know how to assert their rights.
  • Right to accountancy. Current beneficiaries are entitled to accounting. An accounting is a detailed report of all the income, expenses and distributions of the trust. Usually, trustees are required to provide annual accounts, but this can vary depending on the terms of the trust. Recipients may also be able to forgo accounting.
  • Remove the trustee. Current and remaining beneficiaries have the right to apply to the court for the removal of the trustee if they believe that the trustee is not acting in their best interests. Trustees have an obligation to balance the needs of the current beneficiary with the needs of other beneficiaries, which can be difficult to manage.
  • End the trust. In certain circumstances, if all of the current and remaining beneficiaries agree, they can apply to the court to terminate the trust. State laws vary on when this is allowed. Usually, the purpose of the trust must have been achieved or be impossible.

For more information on the duties of a trustee, click here.

For more information on trusts, click here.

Last modified: 06/22/2021

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