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 us online or by phone if we may be of assistance.