Understanding the Role of Living Trust Beneficiaries

Revocable Living Trust Understanding the Role of Living Trust Beneficiaries

Living Trust Beneficiaries Explained

Whether you are a beneficiary or want to assign one, this article will serve as a guide to help you understand the role of beneficiaries in a living trust. See what other factors play into the creation of a living trust, including costs, today! 

What Is a Beneficiary?

When it comes to trusts and wills, a beneficiary is any person who has been named to inherit all or portions of assets. A beneficiary can be an individual, a group, or a registered corporate body and there is no limit to how much any can receive.

A person who selects a beneficiary for a trust is known as a grantor. The grantor is also responsible for choosing a trustee who will run the administrative affairs of the trust after he or she dies. It is the duty of the trustee to carry out the settlement instructions of the grantor and transfer assets to beneficiaries.

All types of trusts — revocable, irrevocable, and joint living trusts — require a beneficiary. Depending on the type of trust, a grantor may be able to do any of the following:

A grantor is able to...Revocable trustIrrevocable trustJoint-living trust
Transfer assets to trust beneficiaries while aliveNoYesDepends on partner
Gift jointly-owned assetsNoDepends on partnerYes
Change beneficiaries without noticeYesNoYes
Terminate the trust without noticeYesNoYes

Types of Beneficiaries

If you are still on the path to choosing your beneficiary, this section of the article can help you rank all your nominees. The three types of beneficiaries are:

  1. Primary beneficiaries
  2. Contingent beneficiaries
  3. Remainder beneficiaries

Primary beneficiaries

A primary beneficiary is your top choice amongst beneficiaries. These are the people you hope to be heirs to your business, future owners of your estate, and the future account holder for assets in your bank account. In most cases, primary beneficiaries are usually children of the grantor and other extended relatives. 

Contingent beneficiaries

The second class of beneficiaries are called contingent beneficiaries. These beneficiaries receive what the primary beneficiary is entitled to if things do not go as planned. A contingent beneficiary can also inherit your assets if your primary beneficiary becomes uninterested in your trust inheritance or does not live beyond five days after your demise. This is called the survivor rule and it applies to most states in the US. 

Though a contingent beneficiary may not be your ideal choice for a beneficiary, add them when creating your living trust to provide full cover against contingencies that can lead to probate. 

Remainder beneficiaries

A remainder beneficiary is assigned to receive assets if both the primary and contingent beneficiaries do not. Over 65% of people who open a living trust do not need them, but they can be valuable in a worst case scenario.

Grandchildren and great grandchildren of a beneficiary all pass for remainder beneficiaries, because they are best in line to benefit from the proceeds of the trust.

The Rights of a Beneficiary

All beneficiary privileges are based on what has been stipulated in the trust, with the primary beneficiary having the highest rights of all three categories. Here are some beneficiary rights:

Termination of the trustA group of primary beneficiaries can come together to dissolve a trust if they believe the trust has served its purpose or its continued existence is becoming counter-productive. 
Contingent and remainder beneficiaries do not have the right to dissolve a trust unless it is stipulated in the trust.
Request for accountingA primary beneficiary automatically has the right to request accounting, tax reports and performance information related to the trust. 
A contingent and remainder beneficiary has no right to request trust accounting information, unless specified by the trust.
Dismissal of trusteeA primary beneficiary can request for the dismissal of the trustee if it is perceived that he or she no longer performs the duties outlined in the trust.
Contingent and remainder beneficiaries can also do this, if the trust permits them to. 
Exemption from trustAll types of beneficiaries can opt out of a trust whenever they want.

What Starting a Living Trust Will Look Like

After you have chosen your beneficiaries, you can proceed to:

  • Choose your trustees and number of trustees
  • Enter the assets and properties to be added to trust
  • Get a living trust form and fill it out
  • Take your living trust form to court for notarization
  • Change the title of your chosen assets

Create a Revocable Trust With DoNotPay

DoNotPay offers a hassle-free way to get started on estate planning. All you need to do is:

  1. Log-in to DoNotPay and click on the Revocable Living Trust product
  2. Assign your chosen beneficiaries and secondary beneficiaries
  3. Assign a trustee and secondary trustee
  4. Provide the assets and properties that will go under the trust
  5. Select an individual or entity that will receive the remainder of your assets not listed on the trust

DoNotPay’s State Living Trust Guides

Want to know more about living trusts specifically for your state? Find your state below to learn more:

HawaiiWashington StateTexas
IllinoisNew JerseySouth Carolina
MassachusettsArizonaMaryland
North CarolinaNew YorkMinnesota
IndianaFloridaMichigan
OhioMissouriWisconsin
PennsylvaniaOklahomaUtah
GeorgiaCaliforniaVirginia
AlaskaOregonColorado
LouisianaIdaho

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