5 Rights of Trust Beneficiaries
As a trust beneficiary, you may feel like you are at the mercy of the trustee. Depending on the type of trust, however, trust beneficiaries may have rights to ensure the trust is properly managed.
A trust is a legal arrangement through which one person, called a “settlor” or “grantor,” gives assets to another person (or an institution), 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.
For a revocable trust—meaning the person who set up the trust can change it or revoke it at any time—the trust beneficiaries have very few rights. Because the settlor can change the trust at any time, he or she can also change the beneficiaries at any time. Often a trust is revocable until the settlor dies and then it becomes irrevocable. An irrevocable trust cannot be changed except in rare cases by court order.
Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. “Current” beneficiaries are presently entitled to income from the trust. “Remainder” or “contingent” beneficiaries have an interest in the trust after the current beneficiaries’ interests expire. For example, a wife may set up a trust that leaves income to her husband for life (the current beneficiary) and then the remainder of the property to her children (the remainder beneficiaries).
State law and the terms of the trust determine exactly what rights a beneficiary has, but following 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.
Information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights.
An accounting. Current beneficiaries are entitled to an accounting, which is a report of all income, expenses, and distributions from the trust. Usually trustees are required to provide an accounting annually. Beneficiaries may also be able to waive the accounting.
Remove the trustee. Current and remainder beneficiaries can petition the court to remove the trustee if they believe the trustee is not acting in their best interests. Trustees are obligated to balance the needs of current beneficiaries with those of remainder beneficiaries, which can be difficult to manage.
End the trust. In some circumstances, if all 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.
If you are a beneficiary in need of advice, we would be happy to consult with you about your rights. Please call Kling Law Offices for an appointment.