A common question trust attorneys often hear from a trust beneficiary is, “What information am I entitled to receive from my trustee about my trust?” Well, the answer depends on 1) what kind of beneficiary you are, and 2) when the trust was created or became irrevocable.
First, in order to understand your rights, we need to clear up some of the legalese you will encounter:
What is an irrevocable trust? A trust is irrevocable when the person who created the trust (“settler”) cannot change the terms of the trust or terminate the trust. You can be sure a trust has been intentionally created as irrevocable when the language of the trust says it is. Otherwise, a trust becomes irrevocable when the person who created the trust has died.
What is a beneficiary of a trust? Beneficiaries are persons (including corporations or charities) who have a beneficial interest in the assets of the trust.
There are different kinds of beneficiaries? Yep, and under the Ohio Trust Code (“OTC”), the kind of beneficiary you are will determine the information you have a right to receive from the trustee. Not all beneficiaries are entitled to receive all kinds of information regarding the trust. The trustee must determine what category a beneficiary falls in when it is time to provide them with information. What a beneficiary is entitled to receive depends on whether they fall into two specific categories:
- Current beneficiary is a person who receives or is permitted to receive distributions of trust income or principal on the date the beneficiary’s status is determined.
- Qualified beneficiary is a beneficiary who, on the date the trustee determines the beneficiary’s qualification, is 1) a current beneficiary, 2) a contingent beneficiary who would receive or would be permitted to receive distributions of trust income or principal if the interests of the then-current beneficiary terminated on that date, but the trust itself would not terminate; or 3) a remainder beneficiary who would receive or would be permitted to receive distributions of trust income or principal if the trust terminated on that date.
Why is the date a trust was created or became irrevocable important? In the last decade the State of Ohio adopted the OTC which provides different rules for trusts created, or those that became irrevocable, on or after January 1, 2007. The OTC also governs the type of information a trustee is required to give beneficiaries.
What about my rights as a beneficiary under a revocable trust? Revocable trusts are those that may be altered or revoked by the person who created them. Even though the OTC was meant to cover revocable trusts, during the lifetime of the settlor of a revocable trust, the trustee’s duties to inform and report are owed exclusively to the settlor, even if the settlor has become incapacitated.
What are beneficiaries’ rights to notice or information under an irrevocable trust in existence prior to January 1, 2007 (pre-OTC)? Any beneficiary, upon request to the trustee, is entitled to promptly receive a copy of the trust instrument, any restatements or amendments. The trustee may initially provide the beneficiary with a redacted copy, but the beneficiary has a right to an unaltered copy upon further request.
All current beneficiaries, regardless of age, are to be provided with an annual trust report setting forth the liabilities of the trust, receipts and disbursements, including the source and the amount of the trustee’s compensation, and a list of trust assets with the assets’ respective market values as of the date of the statement. If the current beneficiary is a minor, the report may be sent to the parent or legal guardian.
What are beneficiaries’ rights to notice or information under trusts created, or revocable trusts that became irrevocable, on or after January 1, 2007?
Current beneficiaries age 25 years or older must receive 1) notice of a trustee’s acceptance of the trusteeship within 60 days of acceptance; 2) notice of the existence the trust, identity of the settlor(s), the right to request a copy of the trust instrument, and the right to an annual trust report within 60 days of trustee’s knowledge of creation of irrevocable trust or that a revocable trust has become irrevocable; and 3) notice that successor trustee has been appointed within 60 days of appointment of successor trustee.
All current beneficiaries must receive 1) notice of a new place of administration 60 days before initiating the transfer of a trust to another jurisdiction for administration; 2) notice of change in trustee’s compensation in advance of the change, and 3) the annual trust report, each year and when the trust is terminated.
All qualified beneficiaries must receive 1) notice that a trust under $100,000 that has been determined uneconomical to maintain will be terminated, 2) notice that a trustee is resigning 30 days prior to resignation, and 3) notice that the trustee will combine two trusts into one or divide one trust into separate trusts prior to the combination or division of trust.
Any beneficiary has a right, upon request to trustee, to 1) promptly receive copy of trust instrument (including amendments or restatements), 2) to receive a trust report annually and at trust’s termination, and 3) to have trust instrument certified. Any beneficiary receiving a distribution must receive notice of a required distribution thirty (30) days prior to distribution.