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How Does a Beneficiary Get Money From a Trust

how does a beneficiary get money from a trust

When figuring out how to get money from a trust, a beneficiary needs to have their attorney read the provisions of the trust agreement to see when and how the beneficiary can get money from the trust. In New York, a trust is an agreement between a trustor (sometimes called grantor, settlor), a trustee, and a beneficiary, where the trustor transfers legal title to his assets to the trustee for the benefit of a beneficiary.

The beneficiary gets money from the trustee, depending on the type of trust that was established. Putting assets in a trust allows the trustor to impose rules on who gets the assets or income and when to get it. Sometimes, a trust is established where the trustor, trustee, and beneficiary are the same person.

The trust document will provide when and how the beneficiary accesses the income and principal of the trust. If this is silent, the trustee is generally given a wide latitude of discretion to decide, provided such decision is in accordance with the law, the spirit of the trust, and his fiduciary duty to the beneficiary.

Trustee’s Duty to Provide an Annual Account

Under SCPA § 2306, a trustee is required to furnish annual statements to any beneficiary receiving income or any person interested in the principal of the trust. If the trustee fails to provide the annual statement, the beneficiary can file a petition with the court to compel accounting. If the trustee refuses to provide an accounting or to do his job, the beneficiary can also petition the court for the suspension and removal of the trustee.

What to Do if the Beneficiary has not Received Money from a Trust

If you are a beneficiary of a trust, and you have not received money from the trust, you may have different options in getting the money that you are entitled and potentially even removing the trustee.

Under SCPA § 711, a beneficiary can file a petition to remove the trustee. A beneficiary can also petition the court to suspend the trustee pending removal. The following are grounds for the petition for removal: (a) Respondent was, or has since become, ineligible or disqualified; (b) Wasted or improvidently managed or injured property; (c) Willfully refused or without good cause neglected to obey any lawful direction of the court; (d) Grant of letters was obtained by false suggestion of material fact; (e) By the terms of the will or trust, his office was to cease upon a contingency that has occurred; (f) Failed without sufficient cause to notify court of change of address within 30 days; (g) Removed property of the estate without the state without court approval; (h) Does not possess qualifications of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office; (i) Testamentary trustee that has violated or threatened to violate his trust or is insolvent orfor any other cause is deemed an unsuitable person to execute the trust; (j) Lifetime trustee, where the supreme court would have cause for removal; (k) Failure to file an account as directed by the court.

Under SCPA § 719, the court may also remove the trustee without a petition or issuance of process in the following situations: (a) Where a fiduciary directed to account fails to appear on return date of process or fails to account without a satisfactory excuse; (b) Where process cannot be served on the fiduciary by reason of absconding or concealing; (c) Default in supplying information as ordered by the court or neglecting or refusing to obey the order; (d) Where the will or lifetime instrument has been deemed invalid or ineffective; (e) Failure to provide required bond; (f) Convicted of a felony, judicially committed, or declared an incompetent; (g) Mingles funds or deposits them in an account other than as fiduciary; (h) Ancillary letters have been issued but original letters in domiciliary have been revoked; (i) Return of an absentee who can serve, or a fiduciary or committee on his behalf (in the case of temporary letters); (j) Where any of the facts of SCPA § 711 are brought to the attention of the court.

How Trusts are Established

To establish a trust in New York, the following information is required: the trustor’s name (the one establishing the trust), the name of the trust, the description of the trust (why the trustor is creating it), the trustee’s name (including directions on how to replace a trustee if he or she can no longer serve), the beneficiary’s name, and the list of properties to be owned by the trust fund.

Types of Trust

There are two basic types of trusts: revocable and irrevocable. The irrevocable trust, from the name itself, cannot be revoked or modified. Once assets are transferred to the trustee, it’s no longer considered the trustor’s. The advantage of this trust is that assets are shielded from creditors, there’s no payment of income tax on the interest made from the assets (the trust fund will pay for it), there’s no estate tax (because they’re no longer the trustor’s assets), and it’s shielded from nursing homes and not considered the trustor’s asset for purposes of Medicaid eligibility. The main disadvantage of this trust is that it cannot be revoked or modified, and therefore, if the trustor needs money in the future, he may not get from the assets of the trust.

The revocable trust is normally called a living trust. It can be modified or revoked at any time. Different types of trusts are: special needs trust, testamentary trusts, and spendthrift trust, to name a few.

Special needs trusts are trusts established for children with special needs. Because these children are incapable of managing the money on their own, one can designate the children as the beneficiary, and the trustee will be in charge of providing for the needs of the beneficiary.

A testamentary trust is created in the last will and testament. Until the testator dies, this trust is revocable. If the will is admitted to probate, the trust is established. Trust assets will not be considered estate assets in this case, and different tax treatments will apply.

Spendthrift trusts are established to let the trustee withhold money from the beneficiary if he or she believes that the beneficiary would waste it or it would be collected by a creditor. It allows the trustor to impose rules on when and how the beneficiary can access the income and assets from the trust.

If you are a beneficiary who is trying to get money from a trust, we at the Law Offices of Albert Goodwin, are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.