A family trust is a special type of revocable living trust in which all of the beneficiaries of the trust are family members. While beneficiaries typically enjoy significant protections in an irrevocable trust, the unique nature of irrevocable trusts limit the rights of the beneficiary while you, as the grantor, are alive. When you die, though, the beneficiaries have the right to your assets and to expect the trustee to protect their interests.
Family Trust Basics
A family trust is a legal arrangement that allows your assets to avoid going through probate when you die. While you're alive, you set up the trust and you transfer the ownership of your assets to the trust, naming yourself as the trustee and your heirs as the beneficiaries. When you die, a successor trustee, who you name in advance, takes over the trust and distributes it to your beneficiaries in accordance with your wishes, as defined in the trust.
While the Grantor Lives
As long as you make yourself the trustee, you control all of the assets of the family trust while you're alive, and the beneficiaries have essentially no rights. You can take assets in and out of the trust as you wish or cancel the trust completely. Just like with a will, you can even change the beneficiaries at any time. As long as you're alive and it's your trust, your beneficiaries have essentially nothing to say about it.
Beneficiary Rights After Death
Once the grantor or, in the case of a married couple's joint trust, both grantors have died, the trust's nature changes. At that point a successor trustee takes over the trust to administer it within the rules you set forth. The beneficiaries have the right to receive what you designated for them. They also can expect that the trustee will fulfill his fiduciary duty. This means that he needs to protect the the trust and the beneficiary's interests as if the money was his own.
Just like a will, beneficiaries can also challenge a trust in court. For that matter, people that you leave out of the trust can also challenge it in an attempt to change your instructions and get a piece of your estate. As with a will, their rights to challenge the document are usually limited, and can be further limited if you design the trust appropriately.
Grantor's Rights After Death
While the beneficiaries have rights once you die and the trust protects them, they're also limited by what you write in the trust. If you, for instance, designate that your beneficiaries can receive the trust's assets at a rate of $1,000 per month, they're entitled to that $1,000 per month and nothing else. As long as your trust is properly written, and an attorney can help you do that, your wishes will be respected after you die.
- Jupiterimages/Comstock/Getty Images