You may want to appoint someone as a trustee of your estate for many reasons. Perhaps you have a child who is already an adult, but you still feel that he or she needs some guidance about how to handle money and other assets in order to avoid having trouble managing them later in life. That is why you may want to appoint the beneficiary of your estate as a trustee so that he or she has special rights and responsibilities while still being able to keep control over the assets by remaining the primary beneficiary. However, this arrangement is more complicated than simply naming someone as a beneficiary alone. And it also raises some important questions: Can a beneficiary be also a trustee? Do they need their own trust? If so, what are the pros and cons of these different options? Let’s take a closer look.
Can A Beneficiary Also Be A Trustee?
Yes, a beneficiary can be a trustee in some cases. In general, a beneficiary is a person with a beneficial interest in the property or an estate in a legal system based on the conception of personhood and ownership. A trustee is a person or entity responsible for the legal, safekeeping of assets on behalf of the beneficiary.
What Is The Difference Between A Beneficiary And A Trustee?
- A trustee is a person who is responsible for overseeing a trust. This person is responsible for making sure that the trust assets are used as you intended. A beneficiary, on the other hand, does not have any special powers when it comes to managing or distributing trust assets. He or she simply receives the benefits of the trust upon your death.
- A trustee is a person who actually manages the trust and the assets it holds. The trustee has a fiduciary duty to the beneficiaries, and this means he or she must manage the trust in the best way possible and for the benefit of all beneficiaries. A beneficiary has the right to receive trust assets under the terms of the trust and at the time the trust ends.
- Trustees and beneficiaries have very different roles and naming a beneficiary as a trustee does not change this. So even if you name your child as a trustee, he or she still won’t have any rights to the trust assets until the trust ends. The beneficiary, however, does have rights to the trust assets, even if you name that person as a trustee. That is why it is important to distinguish between the two roles in the trust so that the person who is the trustee does not have access to trust assets before the trust is over.
Why Would You Name A Beneficiary As A Trustee?
- A trustee has a fiduciary duty to the beneficiaries. This means that the trustee must do what is in the best interest of all beneficiaries, and if there is a dispute among them, the trustee must consider each one’s needs and come up with a solution that benefits them all. However, if you name your child as your beneficiary and also as your trustee, he or she may act in their own best interest instead of for all beneficiaries.
- For example, if your child is named as both beneficiary and trustee, then he or she might use trust assets to pay for his or her child’s college education. While this may be in his or her own best interest (after all, it is his or her own child), this might not be in the best interest of other beneficiaries such as nieces and nephews who are also named in the trust. By giving someone special rights as a trustee but not naming that person as a beneficiary of the trust, you can avoid this problem.
- You may want to name your child as a trustee even though he or she is also a beneficiary so that the child is able to distribute trust assets as he or she sees fit. You may also want to name someone as a trustee who has no right to trust assets because that person can still manage the trust in a way that benefits the other beneficiaries.
Why Would You Name A Trustee As A Beneficiary?
- If you name a trustee as a beneficiary, then he or she will be able to access trust assets before the trust is over. This may be beneficial to the trustee if he or she needs money for expenses and does not want to take money from the trust because it is for other beneficiaries. The trustee can access trust assets for his or her own benefit without having to go through probate court. However, you should make sure that this person follows your wishes and distributes the rest of the assets in accordance with your wishes when the time comes.
- You may want to name a trustee as a beneficiary of your trust because you are confident that this person is able to manage the trust in the best interest of everyone involved. You may also want to name an individual as a beneficiary who is not likely to receive anything from your estate plan unless he or she acts as a trustee. This can be very beneficial for family members who do not have enough money to pay for their own financial needs and must rely on receiving distributions from your trust. By naming someone as a trustee, you can ensure that they will receive distributions from the trust even if they have no right to any of the trust assets.
- You may want to name a trustee as a beneficiary if you want the trustee to have access to trust assets while the trust is still in effect. For example, you may name your spouse as a beneficiary of your trust. If you include your spouse as a beneficiary, then the trust assets are distributed when the trust ends, which could be at any time after you die. If you name your spouse as a trustee, then the trust assets are distributed when your spouse dies. This means the trust assets remain part of your estate and are distributed according to your will.
What Are The Pros And Cons Of Naming A Beneficiary As A Trustee?
- Naming a beneficiary a trustee will give that person special rights and responsibilities. However, that person will still only have the right to manage the trust as outlined in the trust document.
- If you want to give the beneficiary special rights, you can do so by adding them to the trust document. If you name a beneficiary as a trustee, then you can make that person responsible for managing the trust in a way that benefits all beneficiaries.
- That person can be held accountable for the trust’s actions, whereas a trustee without beneficiary rights cannot.
What Are The Pros And Cons Of Naming A Trustee As A Beneficiary?
- Naming a trustee as a beneficiary is not recommended. If you name a trustee as a beneficiary, then that person can be held accountable for the trust’s actions. In addition, if the trustee has beneficiary rights, that person will have special rights and responsibilities.
- If you name a beneficiary who is also named as a trustee, then that person is responsible for managing the trust in a way that benefits all beneficiaries.
- You may also want to name a successor trustee if your current trustee becomes incapacitated or dies before the trust ends. For example, if your trustee has children from another marriage and their mother becomes incapacitated or dies before the trust ends, then naming someone else as successor will ensure that the children’s inheritance doesn’t go to their stepfather’s children instead.
- Naming a trustee as a beneficiary is a good choice if you want to make the trustee responsible for managing the trust in a way that benefits all beneficiaries. This is particularly useful if you do not know who the beneficiaries of your trust will be.
- Or if you want to name someone who does not have any rights of inheritance in your will. Naming a trustee as a beneficiary also makes it easier to keep the trust out of your estate because the trustee will have no rights in your will. Therefore, the trust is less likely to be challenged in probate court.
Trusts are very flexible legal instruments, and there are many different ways to set them up. Therefore, you can name a beneficiary as a trustee or vice versa and still create a sound user trust. Trusts also give you the power to create a plan for the distribution of your assets after you die so that your loved ones receive the money and property they need while also avoiding probate court. And trusts also give you the option of naming a new trustee if something happens to the original trustee. Choose wisely who you name as a trustee. And make sure to regularly review who is listed as a beneficiary to make sure they are still the right person for the job.