Many clients are beneficiaries of a trust, which means they receive distributions now or in the future. If you’re in this situation, you might wonder if you can access the value of your trust benefits sooner. Let’s look at whether a beneficiary can sell their interest in a trust and what factors play a role.
Understanding Trusts
A trust is a legal structure where one person (the Trustor) places assets under the management of a Trustee, who must follow the rules set in the trust document. Beneficiaries receive distributions based on these rules. The terms of a trust can vary greatly, allowing for conditions such as reaching a certain age, graduating, or fulfilling other criteria.
Why Sell a Beneficial Interest?
A beneficiary’s interest depends on the trust’s total value, number of beneficiaries, and specific trust terms. Trust conditions often restrict access to assets until a set date or milestone. For example, a beneficiary with a $500,000 interest in a trust may not receive it for another ten years. That beneficiary could consider selling their future interest to a company that specializes in purchasing beneficial interests for a lump sum, though at a discounted value.
Is Selling an Interest Allowed?
The ability to sell an interest in a trust hinges on the trust’s provisions. A beneficiary does not own trust assets directly. However, they can sell their “interest,” which is the right to get future payments. Some trusts have “anti-alienation” clauses. These clauses protect assets from creditors or outside threats. They block the sale or transfer of the beneficiary’s interest. On the other hand, some trust documents give a power of appointment. This lets beneficiaries direct their inheritance to someone else. They can even choose to sell their share.
Using trust interest as loan collateral is another option but also depends on the trust’s terms. Some allow this, while others do not.
The Bottom Line
The key to knowing your rights as a trust beneficiary is understanding the language of the trust document. If you have questions, consult an experienced trust attorney who can review your specific situation and provide guidance.
Questions About Trusts?
If you want to sell your share in a trust or have questions, contact our estate planning lawyers at Clarity Legal Group. We are located near Raleigh, Durham, and Chapel Hill in North Carolina. Call 919-484-0012 or schedule a consultation. We’re here to help you make informed decisions.
