Thursday, September 24, 2020

What Are the Rights of a Trust Beneficiary in Texas?

The rights of the beneficiary of a trust in Texas will depend on the language of the trust and our state’s statutory and case law. Generally, the terms of the trust document will take precedence over the statutes about the duties of the trustee and the rights of the beneficiaries, but the Texas Trust Code sets some hard limits about how far the trust document can deviate from the statutes. Also, the type of trust and the type of beneficiary will affect the beneficiary’s rights.

If you have questions about the rights of a trust beneficiary in Texas, a Texas trusts attorney can review the trust agreement and answer your concerns. In general, a trust beneficiary has a right to get a copy of the trust document, receive accountings from the trustee, and expect that the trustee will perform all of its duties under the terms of the trust agreement and Texas law, but there are exceptions.

An Overview of Trusts in Texas

A trust is a situation in which a person with some assets sets up a legal arrangement for one person or entity to manage those assets for the benefit of another person. The person who sets up the trust and owns the assets is the settlor. The party who manages the assets and distributes money or other items is the trustee. The party who receives the objects is the beneficiary.

Revocable Trusts

The settlor can change the terms of a revocable trust at any time, as long as he has legal capacity and is still alive. When he dies, the trust becomes irrevocable. People or organizations named as beneficiaries in a revocable trust do not have a right to see the trust agreement because it is not yet “set in stone.”

The settlor could remove the current beneficiaries and select others to replace them. The beneficiaries do not have other rights, such as to receive an accounting or make sure that the trustee manages the assets correctly because their rights have not vested.

Even in the case of an irrevocable trust, all the beneficiaries might not have rights. In an irrevocable trust, there are current beneficiaries and remainder or contingent beneficiaries. The remainder or contingent beneficiaries do not have rights.

Let’s say that the settlor creates an irrevocable trust to provide income to himself, with the income to go to his children after he dies. The children do not have the right to receive distributions from the trust until the settlor dies and they become current beneficiaries.

The Rights of Current Beneficiaries

Current beneficiaries generally have these rights:

  • The right to distributions (payments) according to the trust agreement.
  • The right to information about the trust, the trustee, and their enforcement rights under the trust.
  • The right to an accounting, which can include the assets, income, expenses, and distributions of the trust. Accountings typically happen once a year.
  • The right to go to court and ask the judge to remove the trustee for not acting in the best interests of the beneficiaries.
  • The right to ask a court to terminate the trust if the trust no longer has a purpose, the purpose got completed, or the terms cannot get accomplished.

Contingent beneficiaries might have a right to information or to ask a court to remove the trustee or end the trust, depending on the circumstances and the terms of the trust agreement.

Contact the Law Office of Carey Thompson and schedule a consultation. Our Texas trusts attorney can explain your rights, help you set up a trust, or assist you in challenging the actions of a trustee.

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