Introduction
It’s no secret that estate planning can be complex. Whether you’re creating your own trust or serving as a trustee for someone else, you might have questions about the laws surrounding this process. In particular, trustees may wonder if they can serve this function while also standing to inherit as beneficiaries of the trust.
The good news is that trustees can in fact also be beneficiaries. However, they have a fiduciary duty to maintain the trust and its assets while treating all other beneficiaries equally. Learn more below about trusts and what you can expect as a beneficiary and as a trustee.
What Is a Beneficiary?
While being a trustee can be complicated and involved, beneficiaries have a simpler role in the process. Referring to a person named in a trust, a beneficiary is entitled to receive a portion of the trust’s assets. While some trusts pay out after death, others may distribute funds while the creator is still living. It’s the responsibility of the trustee to ensure the terms of the trust are followed as closely as possible and the beneficiaries receive their money or assets as intended.
What Is a Trustee?
Trustees are appointed to manage and distribute trust assets. As a trustee, you have a fiduciary responsibility to make appropriate decisions and act in the trust’s best interest. Tasks may include filing and paying taxes on behalf of the trust, investing funds, selling trust property, and maintaining assets.
Additionally, the law dictates that trustees may not undertake certain actions unless they first obtain special approval. For example, trustees are not permitted to sell assets to themselves, take loans or gifts from the trust, or divert assets of the trust for their own benefit.
Do Beneficiaries Make Good Trustees?
If you’re creating a new trust, you might be wondering whether it’s reasonable to appoint one of your beneficiaries (such as a child or spouse) as the trustee. The good news is it’s common and acceptable to ask a beneficiary to serve as a trustee. This practice is especially common for revocable living trusts, which may help the estate avoid probate.
While there’s nothing legally wrong with a beneficiary acting as a trustee, individuals in this role need to follow certain requirements to stay on the right side of the law. Trustees should always follow the wishes of the trust creator, even when they feel it goes against their own self interest.
The court may intercede in cases when a trustee who’s also a beneficiary acts against the spirit of the trust. For example, a trustee who’s living in a house that’s a trust asset may be told to move out so the property can be sold and the proceeds split among all beneficiaries.
Let JacksonWhite Law Be Your Estate Planning Partner
At JacksonWhite Law, our legal team has the knowledge and experience to handle a wide range of estate planning concerns. Whether you need help creating documents like wills and trusts, designating power of attorney, or navigating your responsibilities as a trustee, you can count on our experts to make the process as seamless as possible. To learn more about how we can help, contact us below!
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.