Beneficiary Rights & Responsibilities in Idaho
Your parents have named you as a beneficiary of a trust. If the trust is in existence now (meaning that it is not a trust that will come into existence in the future upon a specific date or event such as the death of someone), you have a number of responsibilities and rights to ensure that the trust is administered for your benefit.
Your Responsibilities As Beneficiary
Over the decades we have seen many relationships between trustee and beneficiaries go bad because the beneficiary did not understand the purpose or the operation of the trust, the role and duties of the trustee or his or her responsibilities and rights as a beneficiary. Trusts are a wonderful way for families to create a built in learning situation where beneficiaries can learn about partnership with a trustee, how trusts protect and promote a family and its wellbeing, how investments work, and how they can empower the beneficiary both financially and intellectually.
To ensure that you are an active participant in the trustee-beneficiary relationship, you should understand at a minimum:
- The purpose of the trust;
- The instructions in the trust document to the trustee;
- The limitations on the trustee powers;
- The beneficiaries' powers (such as demanding an accounting and changing trustees);
- The beneficiaries' responsibilities (such a providing receipts for expenses);
- How the management of trust assets should further the purpose of the trust;
- The fundamentals of accounting for a trust's administration (receipts and disbursements);
- Fundamental principals of governing the trustee's administration of the trust.
Beneficiaries can obtain information about these topics from not only the trustee but also the various advisors to the trust including investment managers, attorneys and accountants. Do not be shy. The trustee has engaged these advisors to ensure that the trust is administered for your benefit in accordance with the terms of the trust. Your questions and increasing knowledge will contribute to the goal of your being a responsible beneficiary.
A trust is governed by a specific state's laws and at the inception of the trust, the grantor who has created it chooses which state's laws will control and if in the future, the trustee or another person can change that decision. Law regarding trustee duties are fairly similar among states, however, if Idaho law governs the trust, you have the right to hold the trustee accountable for meeting the following standards:
Standard of Care and Skill
Idaho law provides that a trustee must "observe the standards in dealing with the trust assets that would be observed by a prudent man dealing with the property of another " and "must administer a trust expeditiously". These are higher standards of behavior than you can exhibit if you were just dealing with your own assets. As a result, a trustee must do more than be honest in the trust's administration.
A trustee must not neglect the trust in any way. He or she must actively participate in, and oversee, the administration of the trust, including the investment of the assets.
Regarding the management of trust assets, while Idaho law prohibits a trustee from delegating all of his or her duties, it does provide that a trustee can delegate some. This permission is particularly important when dealing with the management of trust assets. Idaho law has relatively new and rigorous standards regarding investing trust assets, that, without investment management skills, a trustee could have difficultly meeting. However, investment management is a duty that can be delegated to another and a trustee is only liable for prudently making the delegation decision, and overseeing that agent. The trustee is not responsible for the actual decisions of the investment advisor.
Standard of Undivided Loyalty
A trustee must act in good faith and in the best interests of the beneficiaries. A trustee cannot make decisions or enter into transactions that benefit him or her to the detriment of the beneficiaries. A trustee should not borrow money from, or lend money to, the trust. Indeed, a trustee should not engage in any transaction in which the trustee has a personal interest without complying with legal formalities that address the presumed conflict of interest.
Standard of Impartiality
A trustee must fairly and reasonably balance the needs of each of the beneficiaries, not ever favoring one over the other, in his or her decisions unless specifically authorized by the trust document.
Other Important Duties of Trustees
There are also two duties imposed by Idaho law which cannot be delegated to another: the duty to inform a beneficiary of the trust's administration and assets, and the duty to keep confidential all matters pertaining to the trust.
How Can You Hold a Trustee Accountable?
As a beneficiary, you have a number of options:
- Talk to the trustee about your concerns and issues and ask for an accounting if your concerns are not resolved.
- If the trustee does not provide you with an accounting, ask lawyer to ask a court to order the trustee to do so.
- Take action to replace the trustee if you are empowered to do so by the trust document.
- If you are not empowered to remove the trustee, ask a lawyer to request that a court to do so.
How Can We Help You?
Mathieu, Ranum & Allaire have extensive experience in advising beneficiaries and trustees about their rights and responsibilities. We work as a member of your advisor team to ensure that you receive all the information you need to be a satisfied beneficiary. Please contact us should you like to discuss your situation.