Trust planning: Questions for beneficiaries to ask

Each family handles conversations about money differently. For some, discussing finances is a regular practice. For others, conversations may not happen until major life events require family members to get involved and understand the details of an estate plan.

If you find out that you’re the eventual beneficiary of a trust, it can be helpful to start having conversations about what that means for your financial future now. Here’s a checklist of questions to ask both the grantor (often your parents or grandparents) and the trustee and/or trust administrator. Asking the right questions can help you understand your rights and responsibilities as you plan for your future.

Questions to ask the grantor

When you find out you’ll be the beneficiary of a trust, it’s in your best interest to ask questions so you can understand the process and your specific responsibilities.

Here are some questions to discuss with the grantor of the trust:

• What were your intentions in creating this trust?
  Ask why this trust was set up. What are the grantor’s hopes for how this money will be used?
• How do you think this trust will impact me?
  Determine the role this trust will play in your financial future, based on its intended use. Find out if speaking with the trustee or the trustee’s representative (usually called the trust officer or the trust administrator) may also be useful to map out a future that’s not solely dependent on the assets within it.
• Who else has access to the trust?
  Are there other beneficiaries that will have access to this trust? If you have siblings, ask how they’ll benefit from the trust and what their role will be in the trust process.
• What is your relationship with the trustee and/or trust administrator?
  Find out if there are different parties managing and administering the trust. For example, the trustee may be one or more individuals; a corporate fiduciary; or some combination thereof. Find out who will play each role.
• How will I work with the trustee and/or trust administrator?
  See if you can meet with the grantor and the trustee(s) who will be responsible for the trust upon the grantor’s incapacity or passing. Having a good relationship with the future trustee(s) will help for years to come.

Questions to ask the trustee and/or trust administrator

You’ll want to know if the trustee will perform all functions associated with trust administration, including investment management, or if there will be other service providers involved (such as investment managers and tax return preparers). You can review this with the trustee or the trust administrator. It’s important to remember that they are there to help you understand the terms of the trust.

Here are some questions you can ask:

• What is your role as a trustee?
  If you’re new to the trust process, ask for some background information on how trustees or trust administrators’ function. What will their responsibilities include? What will your relationship look like?
• When can I access what’s in the trust?
  Find out what you’re entitled to within the trust. Distribution of trust assets to beneficiaries aren’t the same as taking money out of a bank account; there are usually provisions and rules around the distribution. For example: are there age provisions? This would mean that you receive assets only at specific ages.
• If I request assets, is it mandatory that you distribute them to me?
  Ask the trustee if there are mandatory distribution provisions, or if distribution is solely at their discretion.
• What laws or other factors are considered when distributing assets within the trust?
  When distribution is left to the discretion of the trustee, what factors do they consider before making their decision?
• What sort of information do you need from me—along with my distribution request—to make a decision to distribute funds to me?
  Find out what background information the trustee will need if and when you make a distribution request.
• Am I expected to pay taxes on the trust?
  The trustee will have to file a tax return for an irrevocable trust (Form 1041). Many times, the trust will either pay its own taxes or—if distributions of income are made to you as the beneficiary—that income is passed out and you pay the income tax on it. You may be responsible for some of the capital gains incurred during the year, depending on if you received any principal distributions. Some trusts are also subject to generation-skipping tax, or GST, while others are exempt.
• What information do you share about me with other beneficiaries? What details can I receive about the other beneficiaries from you?
  Ask the trustee how they plan on sharing information about your relationship to the trust. You may also want to know what information you are entitled to about other beneficiaries of the trust.

Download this checklist

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