As the beneficiary of a trust, you are dependent on the Trustee to carry out the duties and responsibilities of that position honestly and faithfully. Most of the time, the beneficiaries of a trust receive their distributions as planned without any serious problems; however, problems can occur during trust administration. If a problem does crop up, what rights do you have? What can you do about the problem? To help you understand where you stand, the Coral Gables trust attorneys at Stivers Law discuss your rights as the beneficiary of a trust.
Trust Basics
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. The beneficiary of a trust can be a person, an organization (such as a political party), a charity (such as a church), or even the family pet. There must be at least one beneficiary but may be an unlimited number. In addition, a trust may have both current and future beneficiaries.
Beneficiary of a Trust: Your Rights
Although you may not have received the assets held in the trust yet, you have a legal interest in those assets because of your designation as a trust beneficiary. As a beneficiary you have legal rights that are inherent to any beneficiary in any trust agreement. In addition, you may also have rights that were specifically granted to you by the Settler in the trust agreement. Because the Settler of any trust creates the trust terms, the Settler can provide beneficiaries with rights that go above and beyond the rights that exist by law. For example, a Settlor often grants the beneficiaries the right to remove the Trustee by majority agreement. In addition to any rights that are granted by the Settlor within the terms of the trust agreement, as a beneficiary the law grants you the right to:
- Distributions. If you are a current beneficiary, you have a right to receive any distributions due to you under the terms of the trust agreement. If you are a future beneficiary, you have the right to be considered when making decisions that could impact your future distributions.
- Communication/information. You have the right to be kept informed about trust business and to be able to communicate with the Trustee of the trust.
- Request an accounting. You have the right to receive a full accounting showing things such as what assets the trust holds, how much interest has been earned by the trust, and what expenses have been paid by the trust. This is an especially important right to remember if you are concerned about the way in which the Trustee is administering the trust.
- Petition a court to remove a Trustee or terminate the trust. The Settlor can specifically grant beneficiaries the authority to remove a Trustee; however, even if the Settlor did not expressly grant the beneficiaries the direct authority, a beneficiary always has the right to petition a court for the Trustee’s removal. The difference is that if you were not granted the direct authority by the Settlor, you will need to convince a judge that the Trustee should be removed. To prevail on such a petition, you will likely need to prove that the Trustee has done one (or more) of the following:
- Mismanaged trust assets
- Engaged in self-dealing
- Failed to follow the trust terms
- Created a conflict of interest
- “Good cause” (this is the “catch-all” for reasons that do not fit neatly into any of the common categories)
Contact Coral Gables Trust Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about your rights as the beneficiary of a trust, contact the experienced Coral Gables trust attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
Justin serves as a member of the American Academy of Estate Planning Attorneys (AAEPA), a national organization comprised of legal professionals concentrating on estate planning. As a member of the Academy, he receives ongoing, comprehensive training on modern estate planning techniques.
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