Who has more Right, a Trustee or the Beneficiary?

The Beneficiary’s Ability to Sue the Trustee

Beneficiaries hold an important right to protect their interests in the trust – the ability to sue the trustee. If a trustee violates their fiduciary duty or breaches the terms of the trust, beneficiaries have the right to take legal action. This includes instances where a trustee mismanages trust assets, shows favoritism towards certain beneficiaries, or fails to provide required information or accounting.

Reason to contest a trust

As a beneficiary, you have rights. One very important right is to get a copy of the trust and will if applicable. There is even a timeframe where the trustee must keep to show they are following their trustee duties.  Below are some reasons other people have contested the trust:

1. The trustee is misappropriating funds:  This happens when the trustee perhaps used some of the estate assets, yet paid it back, but now using the estate as their own piggy bank. 
2. Elder abuse: Many times, a sibling stays with the dying parent and lives with them, and during that time, coereced the parent to change the trust in favor of sibling.
3. Lack of transparency: The trustee unfortunately thought it was ok to keep the beneficiaries in the dark, and though there is an incurred cost to retain an attorney, it’s best as a beneficiary to fight for your rights and ask for your attorney fees to be paid should you win.

Note: There are many other reasons to contest a trust, but these 3 seem to be resonate amongst most beneficiaries. 

Trust Beneficiary Rights

When it comes to the rights of the Trustee and Beneficiary, one must consider the advantages and disadvantages of each party as determined by the trust document.

The Trustee, who may also be a beneficiary, has the rights to the assets and a fiduciary duty to maintain. If not done correctly, it can lead to a contesting of the Trust.  Therefore, the trustee must be deliberate in their actions, and utilize a trust administration attorney when applicable.

On the other hand, the beneficiary must show reasonableness in their requests to the Trustee. There are timetables that each party must adhere to if they want to maintain their legal standings in California. On the timeline of a trust is a 60 days, 120 day notice to the beneficiaries and whether one wants to contest the trust. 

Rights of a trustee of a trust

What rights and responsibilities does a trustee possess? A trustee holds the authority to manage and distribute trust assets as outlined in the trust document. This includes making investments, paying bills, and making distributions to beneficiaries. However, these powers are subject to local laws and any specific court orders. It’s imperative for a trustee to act in the best interest of the trust’s beneficiaries, ensuring assets are collected, preserved, and protected.  As a trustee, make sure you keep a history of all transactions, as you may be called to complete a forsensic audit on all accounts you’ve managed.

Difference between trustee and beneficiary

What’s the distinction between a trustee and a beneficiary in a trust? A beneficiary stands to benefit from the trust’s assets, while a trustee is responsible for managing those assets in line with the trust creator’s intentions. Additionally, trustees have a fiduciary duty to act in the best interest of the beneficiaries. Therefore, due to all the responsibilities, a trustee will typically receive a percentage of the estate for their duties. Typically 1% and will increase if it’s a private fiduciary.

Who has more right, a Trustee or the Beneficiary?

With that said, let’s go over the “rights” of a Trustee and, afterward, the “rights” of the Trust beneficiaries and the options to lose your rights should you act in an untimely manner!

Trust Beneficiary Rights

In a Trustee Beneficiary relationship, the beneficiary rights to information in a Trust are as follows:

List of Specific Rights

To further clarify, beneficiaries must be aware of these specific rights:

• Right to receive information about the trust and its management
• Right to an accounting of the trust’s assets, liabilities, receipts, and disbursements
• Right to enforce the terms of the trust
• Right to request court intervention if the trustee is not acting in the best interest of the beneficiaries
• Right to sue the trustee for a breach of fiduciary duty
• Right to receive their share of the trust distribution, as stated in the trust document.

Other things to consider

1. The Trustee should provide a copy of the Trust to the trust beneficiary. (Beneficiary Rights to Information) Trust beneficiary rights are paramount to maintain, and receiving a copy of the Trust is one of the legal rights of the Trust Beneficiaries. Probate code 16065.1
2. The Trustee should update all trust beneficiaries and heirs when there is a change of Trustee.
3. The Trustee should keep the trust beneficiaries of the Trust reasonably informed of the Trust and its administration. The beneficiary of a trust must stay reasonable and keep deadlines. Probate code 166060
4. The Trustee has 60 days to notify Beneficiaries on “knowledge of the death” of the Trustor. The Trustee identifies the beneficiaries of the Trust and the date of execution of the Trust instrument.
5. The Trustee is to give the name, address, telephone number of each Trustee to the trust beneficiaries.
6. The Trustee gives additional information that the terms may have expressly required of the Trust.
7. Beneficiaries may have the right to petition the courts to remove the Trustee if they believe the Trustee fails in administering the Trust. They have not lived up to their fiduciary duties and have been self-dealing, lacking transparency, bookkeeping issues, etc.

Trustee and beneficiary

Trusts involve holding property in trust for the benefit of beneficiaries, with settlors transferring it into them. Each role plays its own unique role, so as to ensure the trust works effectively for its designated party.

beneficiary vs trust

Trusts involve three key roles; beneficiaries receive benefits from its assets while trustees manage them for the beneficiary’s benefit. Being a trustee requires taking great responsibility as they must adhere to instructions from their trust creator to safely safeguard assets for the future benefit of beneficiaries.

Trustee vs beneficiary

Trustees manage the trust’s assets, while beneficiaries are entitled to receive the assets or their proceeds, highlighting the distinct roles within a trust structure.  If there is litigation, it is essential to select an expert trust litigation attorney to ensure you do the right steps in the right timeline!  Failure to do so, can jeopardize your case.

Beneficiary Occupying Trust Property

Generally speaking, if a trustee determines that a beneficiary is occupying trust property, the options available to the trustee may include:

Allowing the Occupation: If the trust’s terms permit the beneficiary to occupy the property, or if the trustee determines that it’s in the best interest of the trust and its beneficiaries, the trustee may allow the occupation to continue. The trustee may want to formalize the arrangement with a lease or rental agreement, even if no rent is charged.

Charging Rent: If the trust’s terms or local law allows, the trustee may charge the beneficiary rent for occupying the property. The rent would typically be set at a fair market value and would be paid into the trust.

Requesting the Beneficiary to Vacate: If the occupation is not in line with the trust’s terms or the best interests of the trust and its beneficiaries, the trustee may request that the beneficiary vacate the property. This might require following specific legal procedures, depending on the jurisdiction.

Selling the Property: If the trust’s terms allow, the trustee may decide to sell the property, particularly if it’s not being used in a way that benefits the trust or its beneficiaries. The proceeds from the sale would typically be reinvested in accordance with the trust’s terms.

Taking Legal Action: If the beneficiary refuses to comply with the trustee’s decisions or the terms of the trust, the trustee may need to take legal action to enforce the trust’s terms.

Consulting with Other Beneficiaries: If there are other beneficiaries, the trustee may need to consult with them or consider their interests in deciding how to handle the situation.

Documenting Actions and Decisions: Whatever course of action the trustee takes, it’s generally important to carefully document the decision-making process and any actions taken. This can help protect the trustee if there are later questions or disputes about how the situation was handled.

Again, trust law can be complex and varies widely by jurisdiction, so it would be wise to consult with an attorney who specializes in trusts in your jurisdiction to understand the specific options and requirements in your situation. Call us at 1-888-318-4430 for a consultation.

What are the beneficiary’s rights for breach of trust by a trustee

In California, trust beneficiaries may sue trustees for fiduciary breaches such as withholding financial data, misappropriation, improper investment management, or delayed asset distribution. Legal recourse in probate court addresses these and other misconducts, ensuring trustees uphold their duties and the trust’s integrity.

Rights of Trust Beneficiaries to Trust Assets

Beneficiaries have the right to take the Trustee to probate court! As a beneficiary of a trust, you can also lose your rights. How? If you review probate code 16061.8, it states that once notice is served, you may bring an action to contest the Trust within 120 days from the date of notification by the Trustee or 60 days from the time you, the beneficiary, received a copy of the terms of the Trust.  If you believe there has been a breach of fiduciary duty, call today.   Hess-Verdon & Associates is your right choice, and by calling 1-888-318-4430 you will receive prompt and courteous attention.

Can a beneficiary override a trustee?

A beneficiary can override a trustee using only legal means at their disposal and claiming a breach of fiduciary duty on the Trustee’s part. If the Trustee stays transparent and lives up to the trust document, there is no reason to “override” the Trustee. If, however, the Trustee has not completed an annual administration or has lost trust assets, etc., then overriding the Trustee via the use of a trust litigation attorney is paramount.

Trust Trustees Rights and Fiduciary duties

When it comes to Trustees’ rights, it breaks down to the Trust Instrument and living up to their fiduciary duties, which includes to distribute trust assets. The objective of a Trustee: Keep the Irrevocable Trust out of litigation. If the trust beneficiary sues via a trust litigation attorney, the Trustee may be compelled to act. A Trustee stays out of litigation through transparency and ensuring no undue influence. Therefore, be transparent, keep beneficiaries and heirs reasonably up-to-date, and know and understand the pitfalls of Trustee actions.

So with that said, the Trustee of an estate has built-in rights from the courts to complete the following. (not an exhaustive list)

The Trustee has the right to represent the estate for legal purposes:  The Trustee can hire an estate attorney, petition courts, and attend court proceedings if needed.
Trust has the right to manage the affairs and expenses of the decedent’s estate:  The Trustee can receive payment for work performed to manage any debts and expenses and collect receivables, appraisals, and an assortment of Trust administration duties.
The Trustee has the right to contact government institutions:  Trustees can obtain information such as an Employee Identification Number for the estate from the IRS.
The Trustee has the right to issue notifications on behalf of the Trust: The Trustee can create public notices, prepare any records, statements, and tax returns.
The Trustee has the right to invest the Trust assets: If applicable, the Trustees can make sure assets are preserved and productive for current and future beneficiaries.
A Trustee is considered the legal owner of all assets determined by the trust document. Trustees can have a legal say, for example, if a trust beneficiary is occupying a trust property.

As a Trustee, it’s a fiduciary duty that comes with many responsibilities and, unfortunately, periodic questioning from beneficiaries. The irrevocable Trust Beneficiary rights are first and foremost of the Trust Administration process.

If I’m a Trustee, do I get paid? (trustee fee)

Trustee compensation is possible, yet ambiguities lie within the courts. If you look at probate code https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB&sectionNum=15681. It states that a trustee is entitled to “reasonable compensation.” Now, if you have breached any fiduciary duty based on probate code: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB&sectionNum=16420. You could pay back any trustee compensation because of a breach of Trust.

Now, what is reasonable compensation? (Here are some examples)
Private Trustees: Typically 1%. (Should be less than a corporate trustee)
Corporate Trustees: Typically paid 1% to 2% of the Trust Assets.
Professional Trustees: Due to their experience up and above a private trustee, a professional trustee compensation is usually an hourly fee.

What is “ordinary compensation” vs. “extraordinary compensation”?

The courts will typically distinguish between ordinary and extraordinary compensation. Here is a partial breakdown of the differences:

Ordinary compensation: Expected duties to be performed by a Trustee.
Extraordinary compensation:
Handling litigation
Running a business
Managing commercial property

The shared information does not constitute legal advice, so speaking to a trust attorney is essential to build an attorney-client relationship.

The Hess-Verdon law firm focuses primarily on trust litigation, trust administration, and estate planning, including revocable and irrevocable trusts.

Frequently Asked Questions:

Can a trustee ignore its beneficiaries?

In general, trustees cannot simply ignore beneficiaries. As fiduciaries they have an ethical responsibility to act in the best interest of beneficiaries while managing trusts according to its terms; this includes communicating with beneficiaries and responding to reasonable requests for information regarding trusts.

Does Beneficiaries Overrule Trust Terms?

No beneficiary can overturn the terms of a trust. Instead, its governing document, set by its creator (grantor), determines who benefits as described by the grantor in their trust document and any changes must be approved by all beneficiaries (with state laws being taken into consideration if necessary) before any modifications occur.

Who holds the power in a trust?

A trustee typically has the most control in running their trust. They are granted authority by their grantor to oversee and distribute assets according to terms set out in their trust document, while beneficiaries merely reap its benefits without overseeing its operations themselves.

Does a Beneficiary Have the Right to Review Financial Statements of Trusts?

Yes, beneficiaries generally have the right to review the financial statements of any trust they own or are beneficiaries of. This allows them to ensure the trust is being managed appropriately according to its terms, protecting their interests as outlined by Trustees who typically must provide periodic accountings that detail its assets, liabilities, income and expenses.