If your parents, grandparents or other family members decide that they want to pass their assets to you, they may create something called a “trust” and name you the “beneficiary.” There are many different kinds of trusts, but at its most basic level, a trust allows an individual, couple or family to hold certain types of assets on behalf of a named beneficiary or beneficiaries (that’s you).
The trust, however, can’t just be left on its own. It requires a guardian that will watch over the assets, possibly invest them, and make sure that they are distributed to the beneficiary according to the original intent of the settlor (the creator of the trust). This guardian is called a “trustee.”
The trustee owes you (the beneficiary) a fiduciary duty, which means that they must operate and manage the trust to your benefit as much as they can. They also owe you important information about the trust.
So, What Are My Rights As a Trust Beneficiary?
You are entitled to a copy of the trust so you know exactly what assets are in the trust and all the stipulations. For example, your grandparents may have set up a trust that provides $50,000 a year for you and each of your siblings to pay college tuition costs. This would allow you to go to virtually any school regardless of cost…as long as you were aware of the trust and its distribution conditions.
The trustee must also keep you informed about the assets in the trust and any major changes that occur. This means providing you with a list of all the physical assets (like property) and monetary assets (money). In many cases, a trustee may invest the assets in a trust to try to grow them. As a beneficiary, you have the right to know how the trust is being invested and what losses and gains are being made.
The trustee is legally obligated to give you and all of the other beneficiaries of your trust an annual accounting of all the income made by the trust, distributions of the trust and the cost of the trust (the trustee often earns a small income for managing the trust) .
If you feel that a trustee is not performing his or her fiduciary duty toward you or is incorrectly managing the assets in the trust, you have legal options to sue and/or remove the trustee.
To learn more about trusts or your rights as a trust beneficiary, contact Justin Gilbert, an estate planning attorney in Sacramento, CA. Call us at (916) 467-4999.