Can a Beneficiary Enforce the Terms of a Trust?

Can a Beneficiary Enforce the Terms of a Trust?
If you are the beneficiary of a trust, you may not know what to do if it seems the trustee is not properly implementing the trust. Depending on the situation, you may have specific rights to enforce the terms of the trust. Your rights are determined by the trust terms, your beneficiary status, and the Michigan Trust Code.

At BRMM, we assist trust beneficiaries and trustees with matters relating to trust administration and trust litigation. In the discussion that follows, our lawyers summarize the rights of a beneficiary to enforce the terms of a trust.

Importance of Terms of the Trust

A trust operates pursuant to a legal document that establishes the terms for management of the trust and designates the beneficiaries. The trust terms define a beneficiary’s rights to a great extent.

The rights of a beneficiary depend on the type of trust and the status of the beneficiary, both of which are determined by the trust terms. There are different types of trusts, as well as different types of beneficiaries. A trust may be revocable or irrevocable. Current beneficiaries are those who currently receive distributions from the trust. Contingent or remainder beneficiaries may receive distributions at some point in the future on occurrence of a specific event.

A revocable trust can be changed at any time by the grantor (or settlor, the person making the trust). The grantor can remove or replace beneficiaries, or even terminate the trust entirely. As such, a beneficiary of a revocable trust has limited, if any, ability to enforce the trust terms.

In contrast, an irrevocable trust cannot be changed except by a court in limited circumstances. Current beneficiaries and contingent beneficiaries have specific rights defined in the trust itself. Both types of beneficiaries also have rights under Michigan law, to the extent the statutory provisions are not inconsistent with the terms of the trust itself.

If you are a beneficiary of a trust, the first place to look in determining your rights is at the terms of the trust itself. The second source of your rights as a beneficiary is Michigan law. Together, the terms of the trust and state law determine your rights. Evaluating your rights as a beneficiary under the trust terms and state law requires complex legal analysis by an experienced trust litigation attorney.

Trust Beneficiary Rights

Trust beneficiaries may have specific rights under the terms of the trust. If the trust does not address certain rights, Michigan law may provide those rights.

Under MCL 700.7814, a trustee has the duty to “keep the qualified trust beneficiaries [current and remainder beneficiaries] reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” ┬áThe statute goes on to specify actions required of a trustee in keeping beneficiaries informed. If a trustee does not provide the required information and reports, a court has authority to order the trustee to comply.

Current beneficiaries commonly have additional rights, either under the terms of the trust or under state law. Those rights include the right to receive distributions as specified in the trust, as well as the right to an accounting, which is a detailed report of income, expenses, and distributions. Both rights are enforceable in court. Remainder beneficiaries may have the right to an accounting, depending on the trust terms.

In certain circumstances, current and remainder beneficiaries have the right to ask the court to remove a trustee. Generally, removal must be based on a breach of the trustee’s fiduciary duty under the trust and state law. Details regarding removal of a trustee are available in our previous blog post, Removal of a Trustee in Michigan: The Rules Are Clear.

Michigan law provides a range of remedies for beneficiaries if a trustee breaches the fiduciary duty imposed by the trust and state law. A court has broad authority to order appropriate relief in cases involving breach of duty by a trustee. In some cases, a trustee may be ordered to pay damages to the beneficiaries.

Enforcing the Terms of a Trust

Trusts are extremely complex arrangements. If you are a beneficiary of a trust and you think the trustee may not be properly implementing the terms of the trust, one option is to communicate directly with the trustee and express your concerns. You also can exercise your right to request information about management of the trust.

If communication with the trustee does not provide satisfactory results, you should discuss your situation with a knowledgeable trust litigation attorney. Your lawyer will review the terms of the trust and explain your rights and options under the trust and under state law.

Schedule a Consultation With Our Experienced Michigan Trust Litigation Lawyers

If you are the beneficiary of a trust and have concerns about management of the trust and your rights to enforce the terms of the trust, BRMM’s experienced trust litigation attorneys are here to help. We have the knowledge, experience, and skill to address your concerns and answer your questions.

At BRMM, we’ve been providing legal services to clients for more than 40 years. Our compassion, credentials, and commitment set us apart. Call us at (248) 494-4577 to talk with us about matters relating to estate administration or other areas of concern. We serve clients in Troy, Oakland County, and surrounding areas, as well as out-of-state clients with estate and probate matters arising in Michigan.

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