The preparation of a Will can be an emotional and overwhelming task. Hence it is important to understand the basics of a Will including how to make any changes. Changing a trust is a complicated process. It is essential that it is done properly otherwise the trust may be deemed invalid and other problems can arise. Follow this article to understand how to remove a beneficiary from a trust.
What is a Trust?
A trust is a legally binding relationship where a trustee holds assets for one or more beneficiaries. The most common form of trust is a discretionary trust, also known as a family trust. In a discretionary trust, the trustee is given the power to decide which of the beneficiaries are to benefit from the trust.
What is a Beneficiary?
A beneficiary is an individual who receives the deceased’s assets, normally in the form of money or property, following the administration of a Will. There are usually multiple beneficiaries to a Will. Beneficiaries benefit from the trust as an individual or a company. Furthermore, they can be under the age of 18 or be lacking the capacity to make legal decisions. Once they receive the trust property, they have the full legal rights over it.
How to Remove the Beneficiaries from a Trust
1. Trust Deed
The Trust Deed is always the first place to look when making a change to a trust. The Trust Deed explains how the Trust can be changed in relation to the beneficiaries, including how they can be removed. The trust deed will normally provide two methods for removing a beneficiary. First, the beneficiary can sign a document renouncing their interest as a beneficiary. Second, The trustee can use their discretionary power to remove the beneficiary.
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2. Discretionary Trust
Many Trust Deeds have a basic definition of what constitutes a ‘beneficiary’. This allows for a beneficiary to be easily included or excluded. If it is a discretionary trust, you may not have to do much to exclude a beneficiary. The trustee has the discretionary power to exclude beneficiaries from the trust. However, the trustee must act in good faith and for the benefit of the beneficiaries.
3. Execute a Deed of Variation
If you wish to remove someone as beneficiary, you can do so by executing a Deed of Variation. The Deed of Variation must follow the instructions provided in the Trust Deed. The Trust Deed outlines the rules for the trust, including how the trust may be amended. To change the trust deed, you must execute a Deed of Variation. This document updates the relevant section of the original trust deed. It then forms part of the documentation of your discretionary trust and details how the trust deed has been changed over time. It is important that you receive legal advice before changing a trust deed as not following the rules can result in problems. These problems can include being liable for additional taxes.
In conclusion, removing a beneficiary from a trust does not have to be a complicated process. If you have any questions or need further guidance ask an estate lawyer today.
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