If you’re the beneficiary of a business trust, it’s important to know how it works. This article will explain the basics of trusts and why beneficiaries need to be aware of their responsibilities and rights.
What is a Business Trust, and When is it Necessary?
A business trust is a legal entity created to manage assets to benefit its rightful heirs, who are the beneficiaries. The trustee, usually a close family member or friend, is responsible for ensuring that the assets are used following the terms of the trust.
There are many reasons why someone might set up a business trust. Trusts can be used for the following purposes.
Protecting Assets from Creditors
Theft or fraud can be a serious problem for any business. A business trust can help protect assets from creditors in the event of such an occurrence by placing them in the trust. This will prevent them from being seized by the creditor to pay off the debt.
When a person dies, their estate goes through probate. This is a legal process in which the deceased’s assets are inventoried and distributed to the heirs. The distribution will be according to the will or the intestacy laws if there is no will. If the estate is large, the process can be expensive and time-consuming.
A business trust can avoid probate by transferring the deceased’s assets directly to the trust. This can be done by adding a provision to the will stating that the assets should be transferred to the trust or by changing the title of the assets to reflect that they are held in trust.
The advantages of avoiding probate are:
- The estate does not have to go through the time-consuming and expensive probate process.
- The beneficiaries do not have to wait for the estate to be distributed. They can receive their inheritance immediately.
- There is less chance that the assets will be mismanaged or lost while waiting to go through probate.
A business trust can help reduce taxes by taking advantage of certain tax exemptions and deductions available to trusts. For example, a trust can claim a deduction for its contributions to charity. Trusts can also avoid paying estate taxes on their assets by setting up a charitable remainder trust.
Providing for Loved Ones with Special Needs
One of the main benefits of a business trust is that it can be used to provide for loved ones with special needs. The trust can be set up to provide for their care and education and can also be used to pay for any medical expenses they may incur. This will ensure that the beneficiary will be taken care of even if something happens to the trustee.
Rights and Responsibilities of Business Trust Beneficiaries
Beneficiaries of a business trust have certain rights and responsibilities. As the beneficiary of a business trust, you should be aware of these and thoroughly understand each one.
The beneficiaries have the right to:
- Receive information about the trust from the trustee;
- Know how to access trust records;
- Receive distributions from the trust according to the terms of the trust;
- Know how to contact the trustee if there are any problems; and
- Remove the trustee if they are not performing their duties properly.
The beneficiaries are responsible for:
- Paying taxes on the distributions they receive from the trust;
- Making sure that the trustee is following the terms of the trust;
- Informing the trustee of their current address and contact information;
- Keeping the trustee informed of any changes in their financial situation; and
- Providing the trustee with any information they request about their finances
Not all beneficiaries are knowledgeable about the business in trust and about legal matters. Hence, they will not be in a position to determine if the trustee is following the terms of the trust.
It is critical to get the services of a beneficiary rights attorney who can help you protect your rights and responsibilities. A lawyer who specializes in handling the concerns of trust beneficiaries will be especially aware of the risks of trustee misconduct and can take steps to prevent it. If hired after the misconduct has begun, a lawyer specializing in beneficiary rights can take the necessary steps to remedy the situation.
What is Trustee Misconduct?
Trustee misconduct is any action by the trustee that is not in line with their duties or that violates the terms of the trust. Some examples of trustee misconduct include:
- Failing to provide information to the beneficiaries;
- Mismanaging the assets of the trust;
- Making unauthorized distributions from the trust;
- Investing the trust’s assets in risky ventures;
- Taking kickbacks or bribes;
- Committing fraud;
- Using the trust’s assets for personal gain;
- Wasting the trust’s assets; and
- Engaging in self-dealing.
If the trustee is not performing their duties properly or has committed misconduct, the beneficiaries can take legal action to have them removed. A lawyer specializing in beneficiary rights can help you recover any losses that have been incurred and can help you remove the trustee if necessary.
Protect Your Business Trust
A business trust can provide a number of benefits for the owner and their heirs, including tax savings, estate planning, and providing for loved ones with special needs. It is important to understand your rights and responsibilities as a beneficiary of a business trust and to get legal help if you feel that the trustee is not performing their duties properly.
Don’t let trustee misconduct go unchecked. If you suspect that something is wrong, contact a lawyer today to find out what your options are.