Beneficiary of a Trust? Know Your Rights & Ask Questions
We’ve all been in situations where we don’t know what say, what to ask, or what to expect. We’re not experts in everything so that’s all fine and good, right? Well, maybe not if you’re a beneficiary of a trust. Understanding what your long-lost relative left you, the purpose of the trust, how the trust should be administered, what communication is expected from the trustee, how discretionary decisions by the trustee should be made, and your general rights as a beneficiary can not only give you peace of mind and confidence but also be empowering. In other words, having at least some basic knowledge what a trustee’s duties and responsibilities are and what your rights are as a beneficiary will allow you to ask important questions and, if necessary, take actions if things are awry. The word “trust” is part of the word “trustee” for a reason--a trustee is in whom the settlor and beneficiaries place great trust and reliance, and is legally responsible for another’s property, the trust assets. As such, a trustee has many duties and responsibilities, which require the trustee to act in best interest of the beneficiaries and trust assets, within the purposes stated in the trust documents, and as a reasonable or prudent person in the trustee’s position role would do. As trusts have existed for centuries, the expectations, duties, and laws governing trusts and trustees are rooted in common law. The National Conference of Commissioners on Uniform State Laws have drafted and recommended to all states for enactment into law the “Uniform Trust Code” (UTC) (last revised in 2010). Despite the UTC’s comprehensive scope, some aspects of the law of trusts still have not been codified. As such, states’ codification of laws governing trusts and trustees differ (though generally they adhere to similar principles), so it is important to understand the laws which apply in your particular state.
State law and the trust agreement establish what rights a beneficiary has. If trust is revocable, you likely have limited or less rights as compared to beneficiaries of irrevocable trusts. Beneficiaries of irrevocable trusts generally have these common rights: (a) Current and remainder beneficiaries have the right to be given sufficient information about the trust and its administration, so that they know how to enforce their rights; (b) Current beneficiaries have the right to distributions as outlined in the trust agreement or document; (c) Current beneficiaries have the right to an accounting (usually annually) which is a detailed report of all distributions, income, and expenses, as well as assets and liabilities, of the trust. Beneficiaries may choose to waive this right; (d) Current and remainder beneficiaries have the right to ask (aka petition) the court for the removal of the trustee if they believe the trustee isn't acting in their best interest, such as breaching a duty, being negligent in the administration of the trust, or outright stealing from the trust. Trustees are obligated to balance the current beneficiaries’ needs with the needs of the remainder beneficiaries, which can be challenging; (e) Assuming all current and remainder beneficiaries agree, beneficiaries can petition the court to end the trust. When this is allowed varies by state, but typically, the purpose of the trust must have been fulfilled or be impossible. If you’re not sure what is going on, ask questions. The trustee should be able, and in many instances is required, to promptly answer and provide information.
If you suspect the trustee is not doing his/her job because he/she is negligent, committing fraud, or breaching his/her duties and responsibilities to you the beneficiary, you must act quickly. It is essential that you understand your rights in relation to the trustee’s duties and immediately contact an experienced trust attorney to help you ask the right questions and take the best course of action.
— by Keobopha Keopong, Esq., Barnes Law
Keo Keopong is an associate attorney with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.