Who Has More Right a Trustee Or The Beneficiary?

The beneficiary has the rights identified in the trust, including obtaining all documents belonging to the trust. The trustee has the right to manage and distribute the proceeds according to the trust terms.

By Brad Nakase, Attorney

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Table of Contents

1. What is the Relationship Between a Trustee and a Beneficiary?

2. What Are the Specific Duties of a Trustee?

3. What Are the Specific Duties of the Beneficiary?

4. Can a Trustee Withhold Money from a Beneficiary?

5. Can a Beneficiary Overrule a Trustee?

6. How Can Trustees and Beneficiaries Avoid Disputes?

What is the Relationship Between a Trustee and a Beneficiary?

Many people wonder if a trustee has more rights than a beneficiary and vice versa. Of course, forming a trust is a common legal task, but most of us do not understand the nature of the relationship between a trustee and a beneficiary, either.

One of the reasons that the trustee-beneficiary relationship is not common knowledge is that it is difficult to define. The question of who has more rights is subjective since both positions are completely different. Since beneficiaries have different powers and duties than trustees, it can prove challenging to compare the two.

However, it is important for those forming a trust and the eventual trustee and beneficiaries to understand their roles.

Trustees have a lot of authority in dealing with and managing the trust. They have to administer the trust to beneficiaries, which is a significant responsibility. They also must act by their fiduciary duties, meaning that they must act on behalf of the trust and in the best interests of the beneficiaries.

Therefore, trustees wield a lot of power when managing the trust and ensuring that the beneficiaries receive the correct assets on time. However, with that power comes an important sense of responsibility, and trustees must be up to the task and able to perform their duties under pressure. If you’re a trustee accused of fiduciary breach, please contact our civil defense attorney for a free consultation.

What Are the Specific Duties of a Trustee?

A trustee’s duties are outlined in the trust agreement and often differ from trustee to trustee. However, we can identify many of the majority trustees’ main rights. These typically include:

The ability to manage and maintain the property of the trust
The ability to oversee additions to the trust
The ability to deposit trust funds and invest in the trust
The right to change the trust in various ways, for example, the right to develop it
The right to abandon the trust’s property
The right to control, mortgage, pledge or encumber trust property
The ability to insure the trust against loss or damage and ensure the trustee
The ability to use trust money for trust purposes, then repay it
The ability to deal with claims for and against the trust
The right to pay trust taxes and assessments
The right to compensate themselves, as well as employees and agents
The right to pay necessary trust expenses to care for and protect the trust
The ability to create loans from trust property for the beneficiaries
The ability to hire employees of the trust, from accountants to lawyers to auditors
The ability to manage the trust to accomplish the goals of the trust

What Are the Specific Duties of the Beneficiary?

While the trust agreement provides clues to the trustee’s duties, the duties of the beneficiaries are sometimes more difficult to pinpoint. The trustees have much control in this situation and shoulder most of the responsibility.

However, beneficiaries have rights since they are directly connected to the trust. Beneficiaries receive what the trust allocates to them, and the trustee manages and distributes these assets.

Beneficiaries also have the ability to:

Possess the right to fair and equitable treatment by the trustee
Receive and challenge accountings
Receive a copy of the trust document
Possess the right to be sensibly informed regarding the way the trust is run
Receive timely distributions per the trust’s terms
Possess the right to ask the court to have the trustee removed or suspended as needed

While trustees may appear to have more rights, they also have more responsibilities. Beneficiaries also have rights and most center on their right to receive the trust’s assets and stay updated regarding those assets.

Can a Trustee Withhold Money from a Beneficiary?

In some situations, a trustee can overrule a beneficiary. For example, suppose a beneficiary requests an action that is not legally permitted or an action that is not permitted by the trust. In that case, the trustee may be able to supersede them.

California’s Probate Code §16000 dictates that trustees must manage the trust according to the agreement. However, suppose the beneficiary does not agree, for example, with the method or timing of asset distribution. In that case, the trustee can override the beneficiary’s wishes to fulfill the trust’s provisions.

In some situations, a trust’s terms are difficult to decipher or open to interpretation. If a trustee finds the terms of the trust confusing or ambiguous, they should not “guess” how to manage the trust, as this could backfire. Instead, they should consult with an attorney before beginning their duties.

In extreme cases, individuals cannot interpret the terms of the trust correctly, or the beneficiaries disagree with the trustee’s interpretation. When this occurs, trustees can ask a probate court for help. To ask the probate court for assistance, the trustee must petition the court for directions.

Can a Beneficiary Overrule a Trustee?

Usually, beneficiaries cannot supersede the trustee as long as the trustee follows the terms of the trust. If it is clear that the trustee is not following the trust’s terms, however, the beneficiary can challenge the trustee.

However, when the beneficiary disputes the trustee’s opinions or actions, they usually do not have the authority to intervene. A beneficiary can override the trustee’s opinions or actions if the trustee:

Violates the trust’s terms
Violates their fiduciary duty

In some cases, a beneficiary may suspect that the trustee is abusing their power or ignoring the terms of the trust. The beneficiary, for example, may believe that the trustee is self-dealing or using the trust’s assets for its advantage.

When this occurs, the beneficiary has the right to petition the court to remove or suspend the trustee.

How Can Trustees and Beneficiaries Avoid Disputes?

Trustees and beneficiaries have very different roles, but they have one thing in common: to avoid disputes, they should seek the protection of a skilled trust lawyer.

An experienced trust attorney can help trustees and beneficiaries:

Understand their duties
Ensure that they are acting by the trust’s terms and provisions
Ensure that each party is meeting its obligations to the trust

When an individual is appointed to be a trustee for the first time, they should hire a trust lawyer for experienced guidance. In addition, many trustees are unaware of their position’s requirements, and an attorney can help provide information and instruction.

Disputes sometimes arise between trustees and beneficiaries; when they do, both parties need to contact a probate litigation attorney. A skilled attorney will review the trust’s details and provide counsel regarding various outcomes, such as removing the trustee or a lawsuit.

Have a quick question? We answered nearly 2000 FAQs.

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