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What’s the Difference Between a Beneficiary and a Trustee?

A Trust beneficiary is the person who will enjoy the assets of the Trust. In legal jargon, trust and will attorneys refer to Trust beneficiaries as the “equitable owners” of the Trust. Beneficiaries will receive money and other assets from the Trust either outright (meaning being paid all at once) or in smaller amounts over time, based on the provisions in the Trust document.

Managing the Trust Assets

Even though the beneficiaries receive the Trust assets, they do not manage those assets. Unlike assets that you own yourself, Trust assets are managed by the Trustee. For example, if you own your own home, then you are both the legal owner (you manage the home, you decide when to sell it or refinance it…when to put on a new roof) and the beneficial owner (you live there). When a Trust owns a home the Trustee acts as the legal owner and makes all the management decisions, the beneficiaries only get the enjoyment part—living there (if that is allowed under the Trust terms).

It may seem odd that the Trust beneficiaries receive the assets at some point, but they don’t control them (or manage them). That’s just how Trusts work. Trusts effectively separate the legal ownership from the beneficial ownership, which is unique. In nearly every other context the legal and beneficial owners are the same (although there are some exceptions, but not many).

While the Trustee may be the manager, they still must abide by the many duties and obligations of a Trustee. The law places duties on Trustees because they are in a position of power over the assets that benefit the Trust beneficiaries. Trustees are supposed to treat the beneficiaries fairly. And Trustees are supposed to take actions that benefit the Trust, not themselves. That may not always happen, but that’s the way it’s supposed to work under California Trust law.

The bottom line: Beneficiaries enjoy the Trust assets at some point but, until then, they do not control or manage those assets. For an in-depth consultation on your specific case, contact Albertson & Davidson now.