By Mofoluke Keshinro TEP
When beneficiaries are named in a Trust Deed or a Will, there are certain rights they enjoy, these rights are very important and must be protected because they form a critical part of estate planning.
In this blogpost we will discuss the rights of Beneficiaries and how to protect these rights.
Let’s define who a Beneficiary is – Beneficiaries are the individuals or entities who are designated to receive assets or income from a Trust, Estate or a Will.
These rights are outlined below:
- Right To Access Assets in the Trust/Will – Beneficiaries have a right to the assets designated for them in the Trust or Will which includes distribution of funds/payments.
- Right To Information – Beneficiaries have a right to be carried all along on all activities regarding the Trust or Will administration.
- Right To Sue – Beneficiaries have a right to sure the Trustee or Executor/Trustee where they have failed to meet the expectations required of their role or they have been fraudulent. Or where the Trustee or Executor/Trustee has been found not to be working in their best interest.
- Right to Account Books – Beneficiaries are entitled to accounting reports on the Trust or Estate’s investments, inflows and outflows. They can engage an auditor to check the books to validate the figures stated as the financial position of the Trust/Estate.
- Right to Trust Documents/Will – Beneficiaries have a right to the Trust Deed and the Will which sets out their benefits.
- Right to Change the Trustee and/or Executor/Trustee – Beneficiaries can change the Trustee and/or Executor/Trustee where they’ve acted impartially, they have misappropriated Trust Fund or estate funds/assets or where they’ve incurred losses and mismanaged the Trust Fund/Estate assets.
How to Protect These Rights
To protect Beneficiaries’ rights, several legal and practical measures can be implemented as outlined below:
Creating An Unambiguous Estate Planning Documentation:
When drawing up your estate planning documents either a Trust Deed or a Will, ensure the wording in the document are clear and unambiguous. Drafting a clear and simple estate planning document creates a good foundation for the administration of the Trust/estate and ensures protection of beneficiaries’ rights. The estate planning document should outline the terms of the Trust or Estate, which must include the beneficiaries’ names, the benefits accruable to each beneficiary, when they get the benefits, if you have any restriction like spendthrift clauses these must be clear and implemented in line with your directives. Having a well drafted estate planning document will enable seamless administration and prevent misinterpretations which can lead to misunderstandings and disputes among beneficiaries and Trustees and/or executor/Trustee.
Choice of Trustee and/or Executor/Trustee:
The choice of a Trustee or Executor/Trustee is one that must be carefully done. In the selection, you must ensure you are sure if you will use an individual or institution like a Trust company. The qualities that must possesses must include integrity, being financially savvy, professional, accountable, equitable, impartial and transparent. The reason for this is because a Trustee is responsible for managing the Trust/estate assets and would also be responsible for distributing the assets to the beneficiaries in line with the directives in the estate planning documents. A Trustee and/or Executor/Trustee must be willing to act, must be competent to prevent an abuse of the rights of the beneficiaries.
When the Trustee and/or Executor/Trustee gives regular updates and discloses information regarding the administration of the Trust helps to keep the Beneficiaries in the loop especially where there are changes to be made. Information disclosure and regular updates also validates the rights of the Beneficiaries to information on the Trust administration or Estate affairs. This also builds trust and transparency.
Recordkeeping and Accounting:
One of the key responsibilities of the Trustee and/or Executor/Trustee is to maintain accurate records of the Trust/Estate’s assets, income, expenses, and distributions. Keeping records of inflows and outflows, sales, dividend and other accruals to the Trust Account/Estate and sharing this information periodically as account statements with the beneficiaries can help ensure transparency and accountability which establishes the integrity of the Trustee/Executor/Trustee. This also gives the Beneficiaries the opportunity to monitor the growth of the Trust/Estate’s assets.
Assessing The Performance Of The Trustee and/or Executor/Trustee:
Beneficiaries have a right to monitor and assess the Trustee and/or Executor/Trustee’s actions with respect to the Trust Fund/Estate assets. This is with a view to ensuring these actions are in the best interests of the Trust and/or the Estate. Where there is a reason to doubt the Trustee and/or Executor/Trustee due to misappropriation, mismanagement, loss of assets or income, or unfair treatment which can lead to violation of the fiduciary duties, the beneficiaries can take legal action to hold the Trustee and/or the Executor/Trustee accountable to protect their rights.
Where there are disputes regarding administration of Trust/estate assets, Beneficiaries may hire a lawyer to represent their interests to seek redress. Also, where there is misinterpretation of any clause in the estate planning document, Beneficiaries can seek legal advice and interpretation, if necessary. Beneficiaries can also explore resolution of conflicts or disputes through alternative dispute resolution without the hassle of litigation, alternative dispute resolution is faster and more cost efficient.
It is important to acknowledge the rights of beneficiaries, also these rights must be protected by ensuring the directives of the asset owner is followed in distribution of Trust/Estate assets or income while ensuring the designated beneficiaries have access to the assets in the Trust and Estate.