What is a trust beneficiary?

What is a trust beneficiary?

A beneficiary of a trust is a person who by the terms of the trust has the current or future right to have the trustee pay out cash or other trust property to him or her.  He or she is one of the people for whom the trust was established.

What are the rights of the trust beneficiary?

Unless the trust is revocable by someone else (like a revocable living trust while the settlor is still alive), the beneficiary has the following rights, in addition to any rights listed in the trust: 

  • The right to receive notice of the existence of the trust.
  • The right to receive a copy of the trust.
  • The right to receive trust accountings and information about the beneficiary’s interests in the trust.
  • The right to enforce the terms of the trust and to hold the trustee accountable for any wrongful acts or omissions that affect that beneficiary’s interests. 

When will the trust end?

Unless it has been legally revoked, a trust usually ends only when the trust document says it will end.  Trusts usually end when the settlor dies or when one of the beneficiaries dies. But, sometimes a trust ends after a certain period of time or after a certain event takes place, like when a beneficiary gets married or reaches a certain age.

But there are other reasons a trust can end:

  • The term of the trust expires,
  • The trust purpose is fulfilled,
  • The trust purpose becomes illegal,
  • The trust purpose becomes impossible to fulfill, or
  • The trust is revoked.

If the trust ends, the trustee will continue to act as trustee until s/he finishes up the affairs of the trust.

Can the trust be canceled or changed?  

If the trust is revocable when s/he created the trust, the settlor can cancel or change the trust.

If a trust is irrevocable, it is possible that it can be changed in one of the following situations:

If all beneficiaries consent  –  The law says that if all beneficiaries consent, they can petition the Court to change or end the trust.  The court will consider:

  • if the trust must continue in order to carry out the purpose of the trust
  • if the reason for changing or ending the trust outweighs the interest in carrying out the purpose of the trust

If the settlor and all beneficiaries consent – If the settlor and all beneficiaries consent, they can change or end the trust.

If any beneficiary does not consent to change or end the trust, the other beneficiaries, with the consent of the settlor, can petition the Court to partially change or end the trust as long as the interests of the beneficiaries who do not consent are not seriously affected.

If the trust has uneconomically low principal –
If the Court decides it is costing more to administer the trust than the trust is worth, the beneficiary or trustee can ask the Court to end or change the trust, or appoint a new trustee.  If the trust principal is worth $20,000 or less, the trustee can end the trust.

Change or end the trust if circumstances change – The Court may change or end a trust if circumstances have changed and continuing the trust would defeat or weaken the trust.

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Source: Superior Court of California, County of Santa Clara

Harrison K. Long – Business Solutions and Advisory – REALTOR® and broker associate, Coldwell Banker Residential Brokerage – 949-854-7747 (phone) –  CA DRE 01410855 – ExploreProperties@gmail.com

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