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Trust Beneficiary Basics

family gift

How Do I Know If I Am a Trust Beneficiary?  You are a trust beneficiary when you are named in a Trust as a person who will receive or may receive a distribution of cash or assets from the Trust.  Often, if you are a beneficiary, the trustee or another person administering the trust will contact you to tell you that you are a beneficiary.

If a close relative has died, and you believe that you may be a trust beneficiary, it is appropriate, after a reasonable period of time has elapsed, to inquire about your relative’s estate planning documents.  Often, you will feel more comfortable and confident if you retain the services of an estate planning professional to make these inquiries on your behalf.

 

What Should I Do If I Am a Beneficiary?  There are two things that you will need right away if you are a beneficiary:

  1. Contact information for the Trustee and the Trust Attorney
  2. A copy of the Trust

After you obtain a copy of the Trust, you should review it carefully.  Trusts are complex legal documents, and they involve a system of laws that require specific expertise.  If your gift in the Trust is not immediately understandable to you, you should consult with an attorney.

 

Are There Different Types of Beneficiaries?  Yes.  Beneficiaries come in a variety of legal flavors.  For example, you may be a beneficiary of a specific gift.  On the other hand, you may be a residual beneficiary, which means you will receive assets only after the Trust obligations, administrative costs, and direct gifts are paid.

Trusts also vary widely with respect to your rights to demand distribution of your gift under the Trust.  In some cases, a beneficiary will have an immediate right to receive their distribution.  In others, the distribution is purely at the discretion of the Trustee (the person with legal title and control of the Trust).  There are also situations where the Trust property remains in Trust for a period of time or until the occurrence of a specific event, such as the beneficiary attaining a certain age or graduating from college.

 

What are my Rights as a Beneficiary?  Your legal rights as a beneficiary depend on the type of beneficial gift you have under the Trust, the terms of the Trust, and the governing laws for the Trust.  Even if a beneficiary does not have an immediate right to specific assets, a beneficiary has a right to information on an ongoing basis.  For example, we advise beneficiaries of ongoing Trusts to request the following information on a regular basis:

  1. Periodic reports of Trust financial activity, including payments for expenses, administrative costs, legal fees, accounting fees, taxes, and distributions to beneficiaries
  2. The names and relationships of any professionals working with the Trust
  3. Estimated time for distribution, if any
  4. Past or anticipated changes in Trust assets
  5. Compensation paid to the Trustee
  6. Appraisals completed for Trust properties
  7. Tax returns filed on behalf of the Trust

Open and regular communication between trustees and beneficiaries is essential for a smooth Trust administration.  By regularly requesting and reviewing information about the Trust, you and your Trustee can address potential conflicts before they escalate into expensive and stressful litigation.  Again, by working regularly with an experienced trust and estate planning attorney, you can feel confidence that your rights as a beneficiary are understood and protected.

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