A family trust is a trust in which the beneficiaries are family relations of the grantor. Since the assets of a revocable trust legally belong to the grantor, beneficiaries have no rights in trust assets that are not subordinate to the grantor's right to unilaterally revoke the trust. The assets of an irrevocable trust, by contrast, legally belong to the beneficiaries subject to the trustee's fiduciary authority. Trust beneficiaries enjoy certain rights under state law.
A beneficiary has the right to receive distributions from the trust that are mandated by the terms of the trust deed, and the trustee may not withhold such distributions. Some trust deeds vest the trustee with discretionary authority, and a beneficiary is generally not entitled to a discretionary distribution. A beneficiary might assert, however, that the trustee's fiduciary duty of loyalty toward the beneficiaries obligates him to refrain from completely withholding discretionary distributions or favoring one beneficiary over another for personal reasons unrelated to the terms of the trust deed.
A beneficiary of a family trust is entitled to an annual report: a detailed description, prepared by the trustee, of the trust's income and expenses. If the trustee has the authority to invest trust assets, the trustee must report the details of these investments, including their gains or losses.
Authority Over the Trustee
Since the trustee is bound by a fiduciary duty of care toward trust assets, a beneficiary may collect damages from the trustee if he wastes trust assets through negligent mismanagement or self-dealing. A beneficiary may also petition a court to replace the trustee. When ruling on a petition to replace the trustee, a court will give primary consideration to whether the trustee has fulfilled his fiduciary duties and whether he has carried out the original intentions of the trust grantor.
Read More: How to Fire a Trustee
State laws vary on the authority of beneficiaries to terminate a trust. Many states allow beneficiaries to terminate an irrevocable trust by unanimous consent. Some states require the additional consent of the trustee or the grantor (if he is alive). Some states require a court order, based on legal grounds such as fulfillment of the original purpose of the trust, even if all beneficiaries consent to the termination of the trust. Some states do not allow beneficiaries to terminate the trust by consent if any of them is under 18. Once a trust is terminated, its assets will be distributed in accordance with the original intentions of the grantor: they might be divided among beneficiaries, or they might revert to the grantor or the grantor's estate.
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