A trust is a legal arrangement where a Grantor transfers assets to a Trustee, who then manages those assets on behalf of the beneficiaries. If you are named as a beneficiary in a trust agreement, it means you are entitled to distributions from the trust at some point. The type of trust and the terms created by the Grantor will determine when you receive distributions and the value of those distributions. While you are likely grateful to inherit from the trust, the complex nature of trust administration may also cause you to feel a bit overwhelmed. To help clarify your position as a beneficiary, a Murfreesboro estate planning attorney at Bennett | Michael | Hornsby talks about a few things that every trust beneficiary should
know.
Trust Administration Basics
Trust administration is the process by which a Trustee manages and distributes trust assets according to the terms set forth by the Grantor, the person who created the trust. The Trustee’s primary role is to oversee the trust’s assets, ensuring they are managed responsibly and in a way that aligns with the Grantor’s instructions. This includes investing assets, paying any taxes owed by the trust, and distributing assets or income to beneficiaries as directed by the trust document. The Trustee must act in the best interests of the beneficiaries and avoid any conflicts of interest, treating all beneficiaries fairly. Finally, the Trustee is legally required to follow the terms of the trust agreement, including terms related to trust distributions, unless a term is illegal, impossible, or unconscionable. Whether a Trustee can make discretionary distributions is determined by the Grantor and indicated in the terms of the trust agreement.
What Rights Does a Trust Beneficiary Have?
Once a trust has been established and funded, the beneficiaries identified in the trust agreement hold a legal interest in the assets within the trust. This legal interest grants the beneficiaries certain rights, regardless of whether the trust distributes assets immediately or in the future. While the trust agreement may extend specific additional rights to beneficiaries, certain rights are typically granted to all trust beneficiaries under the law, including the right to:
- Access to the Trust Agreement: Beneficiaries have the right to receive a copy of the trust agreement upon being informed of their beneficiary status. It is beneficial to review this document with a knowledgeable trust attorney to fully understand the terms and your entitlements.
- Right to Scheduled Distributions: Current beneficiaries can expect to receive distributions as outlined in the trust while future beneficiaries hold the right to be considered in decisions impacting their eventual distributions and to receive assets as specified in the trust’s terms.
- Right to Request an Accounting: Beneficiaries may request an accounting, which includes a detailed report on trust assets, income, and expenses. This is particularly important if there are concerns about how the Trustee is administering the trust or managing the trust assets.
- Right to Stay Informed: Beneficiaries have a right to be kept informed on the trust’s status and should receive periodic updates from the Trustee. Beneficiaries also have the right to communicate with the Trustee regarding trust matters.
- Right to Terminate or Remove: Beneficiaries may petition the court to remove the Trustee or terminate the trust if they believe the Trustee is breaching the fiduciary duty owed to the beneficiaries. For a court to consider removing a Trustee and/or terminating a trust, a beneficiary typically needs to prove one of the following:
- The Trustee has mismanaged the trust assets.
- The Trustee has engaged in “self-dealing.”
- There is a conflict of interest involving the Trustee.
- The Trustee is not complying with the terms of the trust.
- Right to Fair Treatment by the Trustee: As a fiduciary, the Trustee is legally bound to act impartially and fairly toward all beneficiaries, ensuring each is treated equitably in accordance with the provisions of the trust.
Contact a Murfreesboro Estate Planning Attorney
If you have additional questions about trust administration or your rights as a trust beneficiary, contact an experienced Murfreesboro estate planning attorney at Bennett | Michael | Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your free appointment.
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