After 30 years in the financial planning business, I have been fortunate to build many lifelong relationships with clients and in many cases, their families.
For instance, I recently attended a retirement party for a client’s son-in-law who recently retired from the Morton Grove police department. Unfortunately, my client Betty, passed away in early 2013. I lost two other Betty’s in 2013. All had big families’ with five or six kids.
Over the years, I made certain we coordinated with the attorneys and accountants to make sure all the proper documentation was in place to facilitate a smooth transition from one generation to the next.
If you have been named a beneficiary of a trust, you probably have many questions about what to expect when you assume this role. Trust beneficiaries usually are entitled to income from the trust. The trustee who is in charge of the trust is responsible to make sure that assets from the trust are invested well and productively. The following are some of your rights.
• The right to an accounting of investments: Trustees typically decide how the principal of the trust will be used. As a result, the law requires that trustees act prudently with investments, diversifying so that all the assets of the trust are not in one place, which would put them at risk and could limit returns. If you have questions or concerns about the trustee’s decisions for the investments, you have the right to request an accounting of investments. This accounting report will detail every investment and its gains and losses.
• The right to receive annual trust reports: Trust reports contain information that includes the income that was produced by the trust and expenses and commissions paid out. Traditionally, these reports should be mailed out annually.
• The right to request a new trustee: If a trustee is being difficult, uncooperative or refusing to do the job, you can request a new trustee. This requires a legal filing and a ruling by the court. If the reason for the request is because of large losses of principal, the trustee may be required to repay the trust.
• The right to sue the trustee: The trustee can be held liable for loss of trust assets and for income that would have been earned but for the wrongful conduct by the trustee. The trustee has a fiduciary duty to manage the trust with due care and caution and must be loyal and impartial to the beneficiaries.
• The right to terminate the trust: If all the beneficiaries on a trust are “adults of sound mind,” the trust can be terminated if the court determines the intent of the creator of the trust either already has been accomplished or cannot be accomplished for reasons such as impossibility. All the trust beneficiaries must agree, including those beneficiaries of the trust who are entitled to the remainder of the trust assets after the trust would have naturally ended. Some trusts are difficult to terminate, such as spendthrift trusts where the settlor clearly intended that the trust assets be withheld and protected from the beneficiaries and their creditors.
Being named a beneficiary of a trust is indeed a welcome event, but not without its complications and, if handled improperly, unfortunate consequences.
For help understanding your rights and protecting your inheritance, it may be wise to engage the services of an experienced trust attorney.
Transferring an estate from one generation to the next is the ultimate in family dynamics. The better prepared everyone is before the loss, the better and smoother things will proceed.
Everyone has enough on their plate at this tough time and beneficiaries react differently. A third party often is beneficial to grieving families. I know my three Betty’s appreciated my help.
• Timothy J. Dooley, CFP, is president of Comprehensive Retirement Resources Inc., an independent firm at 201 N. Draper Road, McHenry. Reach him at 815-578-42170.