Introduction to Rights of Trust Beneficiaries
Living trusts are popular alternatives to wills for a variety of reasons, not the least of which is the privacy that they afford. Unlike a will or dying intestate, assets that are held by a trust do not pass through probate, and there is no public record made of the existence of these assets. Thus, friends, neighbors, and curious members of the public (even family members that are not beneficiaries under the trust) are unable to learn the true extent of the trust creator’s wealth and assets.
Trusts are also popular amongst grantors who do not want the family members and friends they choose to benefit to know what other beneficiaries are receiving. In this way, for example, a grantor could leave a substantial amount of assets to one child while leaving very few assets to another child. Problems can arise, however, when the desires of the grantor for privacy conflict with rights of beneficiaries. How secret can the terms of a trust truly be?
For additional information see the article by FreeLegal Advice on the rights of trust beneficiaries.
Rights of Beneficiaries
Beneficiaries to a trust have certain legal rights that are to be honored. These rights supersede any desires the grantor may have for secrecy. In particular, trust beneficiaries have the following rights:
- The right to timely distributions: The terms of the trust will set forth what assets are to be distributed to which beneficiary or beneficiaries and when such distributions are to be made. Beneficiaries have the right to be paid the assets they are due under the terms of the trust. It is a violation of a trustee’s legal obligations to unnecessarily delay the distribution of assets to beneficiaries.
- The right to information about the trust: This does not necessarily mean that the beneficiaries are entitled to an actual physical copy of the trust (although some trustees may choose to do so upon the request of a beneficiary). However, the trustee must provide beneficiaries with sufficient information about the trust and how it is being managed that the beneficiaries can determine what, if anything, they need to do to protect their rights. This is true even if the trustee is given explicit instructions not to provide information to the beneficiaries. The trustee may not simply ignore requests for information or hide behind the grantor’s desire that the trust’s affairs and details remain private.
- The right to an accounting of the trust: An accounting is simply a detailed report that lists the income, expenditures, distributions, and holdings of the trust – a financial “snapshot” of the trust at a particular moment in time. In most cases the trustee must prepare such an accounting on an annual basis: however, if the beneficiaries have reason to believe that the trust is being mismanaged they may request an accounting at any time.
- The right to have the trustee removed: Beneficiaries who believe the trustee is not fulfilling his or her duties or is mismanaging the trust may petition the court and ask that the trustee be removed and replaced with another. If the trust does not name a successor trustee, then the court will replace the trustee with another trustee that may be of the beneficiaries’ choosing.
The assertion of any one of these rights has the potential to invalidate any desire the grantor may have had to keep the details of the trust private. Trustees may find themselves in difficult situations when they are asked to comply with the reasonable and lawful requests of the beneficiaries while attempting to carry out the desires and intentions of the grantor. When these requests and intentions conflict, however, it should be the beneficiaries’ rights that ultimately triumph. Call to speak with an experienced Tucson estate planning attorney.