Following our series on how to serve and protect yourself as a trustee for your family, it only makes sense to talk about the other side of the equation ─ being a beneficiary. Unlike trustees, who have very specific fiduciary duties spelled out for them in our trust laws, beneficiaries don’t have much guidance to help them in the role of beneficiary. Our answers to these frequently asked questions should help provide guidance on how to be a good beneficiary and your rights as a beneficiary under Michigan law.
Do I Have Rights as a Trust Beneficiary?
Absolutely, if it is an irrevocable trust and you are a named beneficiary in the trust agreement. Your rights may differ depending on the trust terms, the state law governing the trust and whether you are a ‘current’ beneficiary (meaning you have a current interest in the trust) or a ‘contingent’ beneficiary (meaning your interest begins in the future after an event, such as the current beneficiary’s death). The rights below are based on Michigan law, and some can be changed or limited by the trust agreement.
First, you have the right to know what is happening with the trust’s assets.
- You may request a copy of the trust document and contact information for the trustee.
- You have the right to receive annually a report of all trust property and trust activity. This includes the market value (if feasible) of all assets at the beginning of the year, liabilities, assets in and assets out, and balance at end of the year.
Second, you have a right to question decisions made by the trustee and take action if you believe that the trustee has failed to:
- Act in accordance with the terms of the trust.
- Administer the trust solely in the interests of the beneficiaries.
- Protect the trust assets.
- Invest trust assets prudently.
- Keep trust assets separate from the trustee’s personal assets.
- Keep you reasonably informed of trust administration.
If you have questions about any of the above, the best first step is to contact the trustee and ask questions. A conversation in person or by phone is usually best to avoid misunderstandings and ensure all questions are addressed. After your conversation, you can request that the trustee put their answers in writing if you would like a written record for future reference.
If the answers are unsatisfactory or the trustee is unresponsive, you can petition the probate court to require the trustee to provide information/answer questions, or to ask the court to remove the trustee if you believe the trustee has breached their fiduciary duties as trustee.
Your right to sue a trustee for breach of trust is available only for a limited time depending on the claim. For example, in Michigan once you have received a report of trust activity, you have five years to bring a claim against the trustee unless the trustee notifies you that you only have one year to bring a claim.
Do I Have Responsibilities as a Trust Beneficiary?
Yes. You are expected to:
- Provide the trustee with your social security number and keep the trustee informed of your current address and other important contact information. This allows the trustee to keep you informed about the trust and provides the trustee information needed for tax reporting.
- Understand the trust terms. Does the trust give you the right to demand funds be paid to you, or are funds only paid to you in the trustee’s discretion? What are the criteria for distributions? When will you receive reports? How will funds be invested? This is best done by sitting down with the trustee to review the trust language and discuss examples.
- Be courteous and responsive to reasonable requests from the trustee. If trust funds may be paid to you ‘taking into account your other resources,’ the trustee will need information about your other available resources. If trust funds may be used if you are ‘diligently pursuing education,’ the trustee may ask for a copy of your grades and number of class credits each semester.
- Inform the trustee of your goals and objectives for the trust and understand whether those are achievable with the parameters of the trust. If you want to receive a certain amount from the trust each year, is that amount achievable given the amount of the trust fund, investment objectives, other expenses of the trust and the interests of other beneficiaries?
- Read the trust reports you receive. Is the trust being invested consistent with the trust terms and your goals and objectives? Are distributions being made as the trust provides? Is trustee compensation consistent with what the trustee reported to you?
- Contact the trustee sooner rather than later with questions or concerns but be considerate of the trustee’s time. You and the trustee will have a better recollection of activity while information is fresh. However, try to collect and ask your questions in one call rather than multiple calls.
- Have some patience. Give the trustee 24 hours to return your call or email.
Help Is Available for Beneficiaries
Warner attorneys help beneficiaries understand their rights and responsibilities, trustee responsibilities, trust terms, trust reports and tax ramifications. We also represent beneficiaries who have concerns about trust administration. Contact your Warner attorney or contact Susie Meyers at smeyers@wnj.com or at 616-752-2184 for assistance in your role as a trust beneficiary.
