Planning is a good thing. Not everyone likes it, but in the face of the inevitable and to ensure that assets representing one’s legacy continue to serve the well-being of intended beneficiaries, few can dispute the value of the proposition.
The problem is that the best laid plans can go awry. Estate plans made up of wills, trusts, and other legal tools require surrogates to act on behalf of the grantor’s wishes, and if those surrogates don’t have a clear understanding of the trust, it could prove the plan’s undoing.
Many legal observers agree that beneficiaries have as much of a role to play in the long-term viability of a trust as do the advisers, trustees and administrators named to fulfill fiduciary duties. What follows are some points that should help beneficiaries manage their expectations about, and contribute to, a trust’s administration.
Know the trust’s specific provisions
Those with experience in this area would surely agree that any solid trust administration plan should include instructions for both trustees and beneficiaries about their obligations and eligibility regarding benefits.
- Beneficiaries should ask for and receive information about what trustee instructions are concerning principal and interest distribution; what form payments can take and how often. Beneficiaries should also learn if the trust grants any administrative powers to them.
- Beneficiaries have a right to know all players making up the trust roster. They could include one or more trustees, an investment adviser, one or more beneficiaries, and possibly a trust protector.
- Trusts don’t always have clearly defined purposes. If none exists, beneficiaries still can ask appropriate advisers or attorneys for insight in this regard. The grantor’s goals might not be to the beneficiary’s liking, but the knowledge reduces chances of disputes with trustees. At the same time, trustees owe a duty of care on behalf of named beneficiaries, regardless of expressed trust purposes.
- The recipient of trust benefits also has a right to know whether the trust dissolves after a certain time. State laws can vary on this point.
- Income from trust can carry different implications to beneficiaries in the context of tax law, so at least a general understanding of trust accounting can be useful.
One final bit of wisdom for beneficiaries is this. Know what assets are available for investing, and regularly discuss changing investment strategy options with the trustee, keeping focus on following the so-called “prudent investor rule.”