Beneficiaries of a trust sometimes do not know a great deal about the rules which apply to them. In many cases, a relative may be the person designated to administer and distribute the trust, but they too might be unclear on the trust details and rules. In these situations, beneficiaries may not be aware of all of their rights. However, Michigan trust beneficiaries have rights they should know about.
What is a Trust?
A trust is a legal device which allows a person to place their assets into a fund which is managed by a person called a trustee (think of a trust like a “bucket” that holds your home, money and other assets during your lifetime and after you pass). The trustee is in charge of the bucket. It is the trustee’s job to safeguard the trust and make sure it is distributed to the people it is meant to benefit (called “beneficiaries”). If the trust is a revocable trust, the person setting up the trust can revoke it and change the beneficiaries at any time. There are also irrevocable trusts which will not allow the trust to be revoked except under very specific conditions. Revocable trust beneficiaries ordinarily do not have as many rights as those receiving from an irrevocable trust. However, regardless of which kind of trust it may be, the terms written in the trust will be important in determining any rights the named beneficiaries may have.
Are all Beneficiaries the Same?
Beneficiaries to a trust are generally either the main beneficiary or an alternate beneficiary. The main beneficiary is the person named as being the person who will receive payment from the trust as soon as it begins. An alternate beneficiary is someone who will receive from the trust once the main beneficiary is no longer around. In essence, the alternate trust beneficiary has to wait for the main beneficiary to die to start receiving their share. Depending on the trust, being a main beneficiary may afford more rights than those of an alternate trust beneficiary. However, the trustee will be obligated to look out for the interests of all types of beneficiaries as they manage the trust.
Beneficiaries’ Rights
Beneficiaries of irrevocable trust generally have certain rights unless the trust document states otherwise. They have the right to be paid according to what the trust document states. Beneficiaries have right to a copy of the trust documents from the trustee upon their request. Beneficiaries also have the right to be reasonably informed about the trust and its administration. They can request an accounting where they are told by the trustee what is happening with the trust and how it is being managed. Beneficiaries have the right to ask the trustee for a report which states all accounting details of the trust such as payments, income, and expenses. Ordinarily, these reports are provided annually. Beneficiaries also have the right to ask permission from a court to remove the trustee if they believe the trustee is mismanaging the trust or otherwise not protecting their interest. Additionally, depending on the terms of the trust, if all beneficiaries agree many times a trust can be modified or terminated, but this becomes complicated and probate court involvement may be necessary.
Being informed of and exercising your rights as trust beneficiary is vital. We have experience and knowledge that can help you ensure that the trust is managed correctly and your interests are protected.Please contact usonlineor by phone if we may be of assistance.
FAQs
Generally speaking, California law states that beneficiaries have a right to information and accounting regarding the trust. More specifically, beneficiaries have a right to information regarding all changes made to the trust promptly, and they have a right to know the plan to administer and distribute the estate.
What are the rights of a beneficiary in a trust? ›
Generally speaking, California law states that beneficiaries have a right to information and accounting regarding the trust. More specifically, beneficiaries have a right to information regarding all changes made to the trust promptly, and they have a right to know the plan to administer and distribute the estate.
Can a trustee ignore a beneficiary? ›
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
Who holds the real power in a trust the trustee or the beneficiary? ›
And although a beneficiary generally has very little control over the trust's management, they are entitled to receive what the trust allocates to them. In general, a trustee has extensive powers when it comes to overseeing the trust.
Does a trustee have to communicate with beneficiaries? ›
The California Probate Code specifically lists certain duties and behaviors the trustee must follow in addition to the rules contained in the trust document. This includes the duty to communicate with the beneficiaries and keep the beneficiaries reasonably informed of the trust administration.
Can a beneficiary take control of the trust? ›
If properly drafted and funded, the beneficiary can control, use and enjoy the inheritance with fewer risks than outright ownership. A Beneficiary Controlled Trust will help protect your loved ones from the bad things in life that may occur without any fault of your loved ones.
What a trustee Cannot do? ›
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
Can a beneficiary sue a trustee personally? ›
The question typically asked is as follows: “can a beneficiary sue a Trustee?” The simple answer is Yes, you can sue a trustee of a trust if you feel they breached their fiduciary duty, but remember, there are a few crucial factors you should consider before attempting to incur cost and time.
What is misconduct of a trustee? ›
What Is Executor and Trustee Misconduct? Examples of executor misconduct and trustee misconduct include: Failing to provide accountings to beneficiaries. Favoring one beneficiary over another. Misappropriating or misusing estate or trust assets for personal gain.
Can a trustee spend the beneficiaries money? ›
But generally, the trustee is entitled to use trust funds to pay for things like: Funeral and burial expenses for yourself or a trust beneficiary. Expenses related to properties included in the trust, such as repairs or property insurance.
Trust funds are managed by the trustee who must act for the benefit of the grantor and beneficiary. Trust funds can take many forms and can be established under different stipulations. They offer certain tax benefits as well as financial protections and support for those involved.
Who has the greatest power under a trust? ›
So, now you know that the Trust Maker holds the most power before the Trust is established, but the Trustee holds the most power after the Trust is established.
Who monitors the trustee of a trust? ›
The truth is that there is no governmental authority that oversees that acts of individual Trustees. There is some oversight of corporate Trustees, and private professional Trustees, but not individuals who are named to act as Trustee.
What if the executor is not communicating with the beneficiaries? ›
If communication is lacking, beneficiaries are entitled to seek court intervention to mandate transparency and regular updates from the executor, ensuring the estate is managed in accordance with the will and beneficiaries' rights are protected.
What happens if a trustee does not follow the trust? ›
If the trustee still will not comply, the court could hold him in contempt. If they continues to refuse to comply, the court may also remove them from his position. During an estate administration, a trustee's failure to comply with the trust terms is just one reason that beneficiaries may find themselves in court.
What are the obligations of trustees to beneficiaries? ›
What types of fiduciary duties does a trustee have to the beneficiaries? The fundamental duties of a trustee are as follows: (1) the duty of good faith and loyalty; (2) the duty of reasonable skill and diligence; (3) the duty to give personal attention; and (4) the duty to keep and render accounts.
What rights do beneficiaries have in an irrevocable trust? ›
Often a trust is revocable until the settlor dies and then it becomes irrevocable. An irrevocable trust is a trust that 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.
Do beneficiaries own trust assets? ›
Does the Beneficiary Own The Trust Property? Even though the beneficiaries receive the Trust assets, they do not manage those assets. Unlike assets that you own yourself, Trust assets are managed by the Trustee.
How does a trust protect beneficiaries? ›
Once an asset is transferred to such a trust, it is owned by the trust for the benefit of its beneficiaries. Therefore, it is safe from legal judgments and creditors since the trust will not be a party to any lawsuit.
Can a trustee withdraw money from a revocable trust? ›
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
Beneficiaries of a trust sometimes do not know a great deal about the rules which apply to them. In many cases, a relative may be the person designated to administer and distribute the trust, but they too might be unclear on the trust details and rules. In these situations, beneficiaries may not be aware of all of their rights. However, Michigan trust beneficiaries have rights they should know about.