The Rights of Trust Beneficiaries

In order to protect the rights of trust beneficiaries to whatever benefit they are due according to the trust, the law provides beneficiaries with ways to monitor the trust and the trustee. Trust beneficiaries are usually entitled to income from the trust, which can be interest from investments or rents, among other things, and the trustee who is in charge of the trust is responsible to make sure that assets from the trust are invested well and productive. The rights of trust beneficiaries to monitor the trust and the actions of the trustee allow trust beneficiaries to protect their interests with regard to the trust.

Trust Beneficiaries are Entitled to Yearly Trust Reports

Whether it is good or bad news, the trust beneficiaries have the right to know. Trust reports contain information for the beneficiaries such as how much income was produced by the trust and expenses and commissions paid out. Traditionally, trust reports should be mailed out annually to the beneficiaries. If the trustee fails to send out at least one annual report and refuses to do so, the beneficiaries have the right to request a reporting of the trust from the court.

Trust Beneficiaries Have the Right to an Accounting

Trustees have the important job of deciding how the principal of the trust will be used. Typically, trusts contain both real property (real estate) and money, giving the trustee great discretion in how each asset is invested. As a result of this, the law requires that trustees act prudently with investments, diversifying so that all the assets of the trust are not in one place, which would put them at risk and could limit returns. If a beneficiary has questions or concerns about the trustee’s decisions for investments, they have the right to request an accounting of investments. This accounting report will detail every investment and its gains and losses.

Trust Beneficiaries Can Request a New Trustee

If the trustee is being difficult, uncooperative, or refusing to do their job, you can request a new trustee. This requires a legal filing and a ruling by the court. If the reason for the request is because of large losses of principal, the trustee will also be required to repay the trust. Before filing this request, keep in mind that courts always do their best to maintain the intentions of the creator of the trust (the settler), so only extremely egregious actions will justify a change.

Trust Beneficiaries Can Sue the Trustee

If the trustee has acted in other than the best interest of the trust beneficiaries, the beneficiaries may sue the trustee. The trustee can be held liable for loss of trust assets and for income that would have been earned but for the wrongful conduct by the trustee. The trustee has a duty to manage the trust with due care and caution and must be loyal and impartial to the beneficiaries. Poor investments, making a personal profit at the expense of the trust, and fraud are among the things that a trustee may be held liable for. The wrongful actions of the trustee are called breaches of the fiduciary duties.

Terminate the Trust

If all the beneficiaries on a trust are “adults of sound mind”, the trust can be terminated if the court determines that the intent of the creator of the trust has either already been accomplished or cannot be accomplished, for reasons such as impossibility. All the trust beneficiaries must agree, including those beneficiaries of the trust that are entitled to the remainder of the trust assets after the trust would have naturally ended. Some trusts are difficult or to terminate, such as spendthrift trusts where the settlor clearly intended that the trust assets be withheld and protected from the beneficiaries and their creditors.

If you are a trust beneficiary and you believe that the trustee is acting improperly in any way, or you wish to terminate a trust that is not productive, it is advisable that you contact an attorney as soon as possible for help making sure you are treated fairly and honestly and receive the benefits you are entitled to under the trust.

Case Studies: Securing the Rights of Trust Beneficiaries

Case Study 1: Trust Beneficiaries’ Right to Yearly Trust Reports

John and Lisa are beneficiaries of their late grandfather’s trust, which generates income from rental properties. However, for the past two years, they have not received any annual reports from the trustee. Concerned about the transparency of the trust’s financial activities, John and Lisa consult an attorney.

The attorney advises them to assert their rights by requesting the court to compel the trustee to provide detailed yearly trust reports, including income, expenses, and commissions paid out.

Case Study 2: Trust Beneficiaries’ Right to an Accounting

Sarah is a beneficiary of a trust established by her parents, which contains various investment assets. She recently discovered that the trustee made risky investments without considering diversification, leading to substantial losses. Worried about her future inheritance, Sarah exercises her right to request an accounting of the trust’s investments. The accounting report reveals the trustee’s imprudent decisions and helps Sarah assess the trustee’s management of the trust’s assets.

Case Study 3: Requesting a New Trustee

Mark is a beneficiary of a trust managed by his sister, Karen, who has been neglecting her responsibilities. Karen fails to maintain proper records, ignores beneficiary requests, and shows no interest in safeguarding the trust’s assets. Frustrated by Karen’s behavior, Mark consults an attorney and decides to request a new trustee through a legal filing.

The court reviews the case, takes into account the trust’s original intentions, and ultimately appoints a more capable and trustworthy individual to serve as the new trustee.

Case Study 4: Lawsuit against the Trustee

David is a beneficiary of a trust administered by his uncle, Richard. However, David discovers that Richard has been embezzling funds from the trust for personal gain. Outraged by the breach of trust, David decides to take legal action against Richard.

He files a lawsuit against Richard, seeking to hold him liable for the misappropriation of trust assets and the lost income that would have benefitted the beneficiaries. The court reviews the evidence and may order Richard to repay the trust and potentially face additional penalties.

Case Study 5: Termination of the Trust

Jennifer and Michael are beneficiaries of a trust established by their late aunt. However, they have lost contact with the trustee, who has disappeared and left the trust unmanaged. Jennifer and Michael consult an attorney to explore their options.

After thorough research, the attorney advises them that, given the circumstances and the lack of productive administration, they can pursue termination of the trust. They gather all the beneficiaries’ agreement and file a petition with the court, seeking termination based on the impossibility of fulfilling the trust’s intent.