Can a Trustee Also Be a Beneficiary?

Note: The following article is part of our Complimentary Articles Series, designed to provide additional insights and detailed information on specific topics within estate planning.

Alongside this article, we suggest exploring our pillar articles for a comprehensive understanding of general legal issues related to estate planning.

• Should I Have a Trust?
• Why Gift Assets into a Trust During My Lifetime?
• When Should I Consider Getting a Trust?
• What is a Trustee?
• How Do I Remove a Trustee?

INTRODUCTION

This answer to whether a Trustee can also be a Beneficiary is the same as the answer to whether an Executor can also be a Beneficiary.

The answer is a resounding "yes." From a legal perspective, nothing prevents a Trustee from being a Beneficiary of the same Trust, and it's a perfectly acceptable and practical choice. It's also common practice. However, be mindful of the factors when deciding who to choose.

This article highlights the practical and legal considerations when appointing a Trustee who also happens to be a Beneficiary. For context, we recommend you read our related articles on Trusts.

REMEMBER THE TRUSTEE'S PRIMARY ROLES AND RESPONSIBILITIES

If you're contemplating a situation where you're about to appoint a Trustee who is also a Beneficiary, you must ensure the Trustee is absolutely aware of their two primary responsibilities:

• Fiduciary Care: In the best interests of all Beneficiaries, the Trustee must manage the Trust's assets with impartiality, objectivity, and the highest degree of good faith.

• Distribution of Assets: The Trustee must abide by the provisions of the Trust Agreement, allocating assets equitably and in accordance with the Grantor's wishes.

KEY FACTORS TO CONSIDER

To help you decide whether it's a good idea to appoint a Trustee who is also a Beneficiary and to avoid any potential conflict of interest, consider the following factors:

• Trust: The Trustee needs to be trustworthy, be of good standing, and act impartially when balancing their fiduciary duties with their personal interests.

• Potential Conflicts: Consider whether having this dual role could result in any potential disputes, particularly if the Beneficiaries don't have common interests.

• Knowledge and Experience: Sometimes, a Trustee's specific expertise and experience could work in favour of both the Trustees and Beneficiaries, especially in legal, financial, and tax matters. Any skills that help make the administration process much easier are most welcome.

• Ensure Clarity in the Trust Agreement: Make sure that the Trust Agreement clearly communicates roles and responsibilities. If you have multiple Trustees, you can split out the duties, allowing your Trustee-Beneficiary to take on a role task that doesn't conflict with their status as a Beneficiary.

• Fiduciary Oversight: Having multiple Trustees also allows you to insert an additional layer of scrutiny into the process, ensuring that no single Trustee could make a decision that might be perceived as working in their favour.

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