What you need to know about inheriting a Trust

Inheriting a trust is a significant life event and can be overwhelming for those who have not been prepared for it. 

Should you be one of the fortunate few who have inherited a Trust, you may have many questions about what comes next. 

To ensure your financial and other interests are protected you need basic information about the different Trust structures and how they are managed. 

Trusts can be grouped into two broad categories: Living Trusts and Testamentary Trusts. 

A Living Trust is created by an individual during his or her lifetime (this person is called a settlor) and any assets transferred into the Trust is then managed by the trustee. In this case, you are already a beneficiary during the lifetime of the settlor and you can familiarise yourself with the details of trust in cooperation with the settlor.

A Testimony Trust is only formed upon the death of the person whose assets it represents and can be used to provide for current or future beneficiaries. In this scenario you inherit a trust, as the assets will only be put into the trust at the time of inheritance. This leaves you less time to prepare for your role as a beneficiary of a trust. 

If this happen you will have a lot of questions so it is essential to establish a clear communication plan and outline the tasks required to settle the estate. 

Each Trust is unique so it’s important for you and your trustee to sit down and go over the provisions in your Trust document.

Together with your trustee and advisory team  you can create a plan that is based on the terms of the Trust and take into consideration your financial needs as a beneficiary. 

The trustee will try to ensure, that you understand the terms of the Trust. The typical questions, that should be addressed here: 

• How many beneficiaries are there? 
• Is there an age limit the beneficiary or beneficiaries have to reach before accessing the Trust?
• Does the beneficiary only have access to the income from the Trust or access to the principle asset(s) as well?
• What category of expenses can the Trust cover for the beneficiary?
• What is the lifetime of the Trust? Does it terminate once the beneficiary comes of age?
• What is the tax treatment of the inheritance? 

In addition we always recommend clients to seek the guidance of a Tax Advisor to provide insights on any tax implications regarding the distribution of the Trust assets or income. 

During the administration of the trust you will be dealing mostly with the trustee so it’s important to familiarise yourself with some of your rights as a beneficiary: 

• The right to a copy of the trust document
• The right to be kept reasonably informed about the trust and its administration 
• The right to an accounting 
• The right to be treated impartially by the trustee 
• The right to receive timely distributions from the trust 
• The right to petition the court to have the trustee suspended and surcharged

Hensley&Cook is an experienced Corporate Trustee and can help you navigate your inheritance. 

Contact us on [email protected]