A Trust is a written instrument giving directions on how Trust property should be held and eventually distributed. A Trust, unlike a Will, is a private document and may be shared only with those persons named in the Trust. For privacy reasons, may people may choose to distribute their property under a Trust rather than a publicly filed Will.

The Grantor gives legal title to the trust property to the person known as the Trustee. In most Revocable Trusts, also known as Living Trusts, the Grantor also serves as Trustee as long as he or she is capable of serving. A Trust will name people who are to receive the property or income from the property; these people are the Trust Beneficiaries. The Beneficiaries hold what is known as equitable title to the Trust property. The Trustee, by holding legal title, has the duty to manage and protect the Trust property for the ultimate benefit of the Beneficiaries.

For example, John Smith executes a Trust agreement and funds it with ten thousand dollars ($10,000.00). John Smith is the Grantor of that Trust agreement. John Smith names himself as Trustee for as long as he is capable of serving. John Smith’s Trust agreement names his two minor children as the beneficiaries of the Trust who will each receive one-half of the Trust property when the youngest child turns twenty-one years old. John Smith, Grantor, has granted legal title to himself as Trustee and granted equitable, or beneficial, title to his children as Beneficiaries.

Can Beneficiaries ask to modify the terms of or terminate a Trust?

Beneficiaries may disagree with the terms of the Trust itself. The Uniform Trust Code (“UTC”) allows beneficiaries, under certain circumstances, to petition for modification or termination of a Trust agreement.

A Trust, like a Will, can be contested and declared void if the Grantor created the Trust due to fraud, duress, or undue influence.

A Trust, though validly created, may still be modified or terminated by Court order. Terms within a Trust may be modified to correct unintentional mistakes of the Grantor. Beneficiaries may petition to clarify ambiguities in a Trust agreement. The Trustee of a small Trust (less than $50,000.00 worth of cash or property) may petition the court to terminate the Trust and allow for disbursement of funds to the named beneficiaries.

If you are the beneficiary of a Trust and believe you may have a reason to petition for modification or termination of a Trust agreement, an experienced attorney should be consulted so that they can review the terms of the Trust. Travis Morton is an experienced Wills and Trusts litigator who can advise you of your rights and possible claims you may have. You can email him at travis@travismorton.com or call him at (919) 782-3500.

What are the duties of a person serving as Trustee?

A person serving as Trustee is charged with the management and care of Trust property until such time as the Trust agreement allows the Trustee to give the property to the Beneficiaries. A Trustee cannot use the money or property in a Trust for his or her own benefit.

North Carolina, along with many other states, have adopted the Uniform Trust Code and the Uniform Prudent Investor Act which provide guiding principals enforceable at law as to the proper behavior and duties of persons serving as Trustee.

The UTC provides that a person serving as Trustee must, at all times, act in good faith, act in loyalty to the Trust agreement and beneficiaries, and be impartial in its treatment of beneficiaries named in the Trust. A Trustee must also, upon request of a qualified beneficiary, provide, “complete and accurate information as to the nature and amount of the trust property and to permit the beneficiary, or the beneficiary's representative, to inspect the subject matter of the trust and the accounts and other documents relating to the trust.” Please note that only the qualified beneficiaries of a Trust are able to request such information from the Trustee. Furthermore, the UTC provides different standards for Trustees, depending upon the relative skill of the Trustee. An individual family member without formal financial or legal skills may be held to a different standard when serving as Trustee than the standard to which the law holds a corporate Trust company serving as Trustee.

What if a Trustee is not properly performing the duties of a Trustee?

Beneficiaries of a Trust, like beneficiaries of a Will or intestate estate, have the right, or legal standing, to sue to enforce the terms of the Trust or the duties of the Trustee. Beneficiaries must show that the Trustee has breached his or her duties in order to be granted relief by the Court. Relief may include ordering a Trustee to produce accountings to the Beneficiaries, compelling a Trustee to prudently invest trust property, or removing the Trustee and appointing a successor Trustee. A Trustee generally cannot be sued for serving in reliance upon the terms of the Trust agreement.

If you are the beneficiary of a Trust and strongly disagree with how the Trustee is managing trust property, an experienced attorney should be consulted so that they can review the terms of the Trust. Travis Morton is an experienced Wills and Trusts litigator who can advise you of your rights and possible claims you may have. You can email him at travis@travismorton.com or call him at (919) 782-3500.