Trust Beneficiary Rights

@ 2015 Gaughan & Connealy Estate Planning Attorneys. Private & Confidential
• A trust beneficiary is the person who receives the
benefit from a trust, such as trust property or
income from the trust.
What rights does a trust beneficiary have?
@ 2017 Gaughan & Connealy Estate Planning Attorneys, Private & Confidential

What rights does a trust beneficiary have?
• As a trust beneficiary, you may believe that you are at the mercy of the trustee.
• But, depending on the type of trust, trust beneficiaries generally have rights that are protected by trust laws.
• Those protections are there to ensure the trust is properly managed for your benefit.

What is a trust and how does it work?

What is a trust and how does it work?
• A trust is an agreement that is based on confidence and trust between the person creating the trust (the
trustor) and the trustee.
• The trust agreement provides authority to the trustee so he or she can manage the trust assets and distribute
them to the named beneficiaries.
• The trustee must do so within the terms of the trust document as it was drafted.
5@ 2017 Gaughan & Connealy Estate Planning Attorneys, Private & Confidential

The primary benefits of a trust in general

• Similar to your will, trusts can provide a great way
to decide now how you want your estate to be
handled after your death.

• However, unlike the will, trusts can also provide asset protection for those who have beneficiaries who may
need special assistance in managing their inheritances.

How a revocable trust is different from
an irrevocable trust

• The main difference between a revocable trust and
an irrevocable trust is whether their terms can be
modified.
How a revocable trust is different from an irrevocable trust

How a revocable trust is different from an irrevocable trust
• An irrevocable trust, by definition, cannot be modified once it has been executed. For that reason, irrevocable
trusts can have very favorable tax consequences.
• For instance, assets that are included in an irrevocable trust are basically beyond the reach of creditors.
• That means, despite losing some control over your assets, you can gain other benefits by using an irrevocable
trust.

Tax advantages for a trust beneficiary

• Certain types of trusts can provide tax advantages
for both the trustor and the beneficiary.

• These particular types of trusts are often referred to as "credit shelter" trusts or "life insurance" trusts.
• There are also types of trusts that can be used to protect property from creditors, as well as, to preserve
eligibility for Medicaid.

Current beneficiaries and remainder
beneficiaries

• The rights that a beneficiary enjoys will depend on
the type of beneficiary they happen to be.
Current beneficiaries and remainder beneficiaries

Current beneficiaries and remainder beneficiaries
• There are two categories of beneficiaries: current and remainder.
• Current beneficiaries are the only ones who have a present entitlement to income from the trust.
• Remainder beneficiaries have an interest in the trust only when the current beneficiary's interest has been
terminated. Remainder beneficiaries are also referred to as contingent beneficiaries.
• A common example of remainder beneficiary interests is when one spouse leaves income to the other spouse
for life.
• The beneficiary spouse is considered the current beneficiary and the remainder of the property is left to the
children, who are the remainder beneficiaries.

The rights of a current trust beneficiary

• The exact rights that a beneficiary may have are
established in the terms of the trust document, as
well as the laws in your state regarding trusts.

• But, there are some common rights that the beneficiary of an irrevocable trust typically has. Current
beneficiaries have the right to payment of distributions as provided in the trust document.
• Current beneficiaries also have a right to receive information about the trust and its administration in order to
enable them to enforce their rights.
• Current beneficiaries also have a right to a detailed report of all income, expenses, and distributions from the
trust, commonly referred to as an accounting.
• Usually, trustees must provide an accounting each year, depending on the specific terms of the trust.
Beneficiaries are allowed to waive the accounting if they choose.

Rights shared by current and remainder
beneficiaries

• Both types of beneficiaries, current and remainder,
have a right to petition the court for the removal of
the trustee if there is ever a concern that the
trustee is not performing in the best interest of the
beneficiaries.
Rights shared by current and remainder beneficiaries

Rights shared by current and remainder beneficiaries
• Though it can be a challenge, trustees are required to balance the needs of the current beneficiaries with the
needs of the remainder beneficiaries.
• Additionally, when both current and remainder beneficiaries are in agreement, a petition can be filed with the
court to terminate the trustee, if necessary.
• The trust laws in each state might differ on this issue. Generally, when the purpose of the trust has been
fulfilled, or has become impossible to fulfill, the trust can also be terminated.

If you have questions regarding your
rights as beneficiary, or any other estate
planning matters, contact Gaughan &
Connealy for a consultation by calling
us at (913) 262-2000.

Trust Beneficiary Rights

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