Who makes decisions over your Trust assets? If you are the beneficiary of a Trust, you may be surprised to learn that the Trustee is the person, the only person, who decides what to do with your Trust assets. Whether it is buying, selling, paying, or bartering, the Trustee calls the shots. That’s just how Trusts work. The Trustee is the legal owner, meaning he has the right to make ownership decisions. But you are the beneficial owner, meaning you get the benefits of the Trust.
Legal vs. Beneficial Ownership
In normal everyday life we don’t usually separate out legal ownership from beneficial ownership. If you own a home, you are both the legal owner (you decide when and if to sell it) and the beneficial owner (you can live there or collect rent from someone else—or both if you just rent a room). But with Trusts, those two types of ownership are separated. The person who manages the Trust assets, the Trustee, can do so unilaterally—without any input or say from you, the beneficiary.
But Trustees who make decisions over Trust assets without involving beneficiaries in the decision are playing a dangerous game. Every good Trustee operates on the principle of full disclosure. And it makes sense to do so because it helps protect the Trustee from future lawsuits. Think about it. If you are asked to give your input and opinion about a Trust decision, you are less likely to complain about that decision later on. You had a chance to give your two cents.
Even in cases where a Trustee takes an action you disagree with, that action is easier to accept when you at least had (1) some advance warning it would happen, and (2) a chance to voice your view on the issue.
Major Actions Without Consulting Beneficiaries
However, when a Trustee takes a major action, such as selling the family home, without so much as talking to you about it first, then there are going to be bad feelings. More than that, beneficiaries can often provide helpful information. Imagine that, a beneficiary being helpful. Often times, the beneficiaries know more about the Trust assets and how to properly handle them because the beneficiaries have been around those assets for a long time. A family home, a family business, these assets take on a life of their own over time. A Trust beneficiary may be able to provide helpful insight about the proper way to dispose of such assets.
Of course, if the beneficiaries cannot agree, then the Trustee must take action against a beneficiaries advice. But it’s much better to inform beneficiaries and ask for their input than just steamrolling ahead without any care as to what the beneficiaries may be thinking. Good Trustees know this, and bad Trustees ignore it.