How Long Does a Trustee Have to Distribute Assets?

Let’s review a trustee’s role, trust asset distributions, and what to do if you have yet to receive a distribution promptly as a beneficiary.

 

About Trustees’ Roles

A trustee’s responsibilities include extensive organization to ensure that trust assets reside properly and sound investments are made for beneficiaries. As a trustee, you must get a death certificate, locate the will and file it in the local probate court, and inform the:

• The Social Security Administration and the Department of Health verify the death.
• Evaluate assets.
• Settle debts.
• Transfer the property into your ownership.

After that, a trustee must contact the trust beneficiaries. Generally, beneficiaries come under two categories: current or contingent. Current beneficiaries will be the first beneficiaries to receive the trust’s assets.

A contingent beneficiary will be next if a current beneficiary dies before the trust becomes irrevocable. Trusts offer maximum flexibility because assets can be transferred at any age or for the beneficiary’s lifetime. Unlike many trusts that set an age for assets to be distributed, such as 18 or 21.

 

Defining “Trust Distribution”

Trustees distribute trust assets to trust beneficiaries according to the terms outlined in the trust instrument, which is the process by which assets go out. Trustees can ensure they are handling distributions following the trust creator’s wishes by following the trust instrument.

 

A Guide to Finding Out If You Are a Trust Beneficiary

Viewing the Trust deed lets you determine if you are one of the beneficiaries. However, since Trusts are not public records, a copy of the trust may not be available.

Suppose you review the actual trust to determine if you made a list as a beneficiary. Know the attorney who drafted the trust or know where the decedent’s Estate Planning documents are. That would be the responsibility of the trustee. As a beneficiary, you will have the right to receive a copy of the trust.

To settle an estate properly, promptly, and in the manner you intend. Understanding the role of distributing Trust funds to beneficiaries in Estate Planning is essential.

 

What Is the Best Time to Distribute Trust Assets?

Trusts come in many types, and you must determine which best suits your needs. There are two fundamental types of trusts: revocable trusts and irrevocable trusts.

When you create a revocable trust and fund it, it is easy for you to modify it. However, it offers the least amount of asset protection. After they are set up and funded, they go into effect for your lifetime.

They become irrevocable when you pass away, so you cannot change them. Once the trustor (the Trust creator) passes away, a revocable trust typically remains open for about 12-18 months. After paying all estate debts and taxes, the remaining estate value will pass on to beneficiaries.

While irrevocable trusts protect your assets from claims, liens, or judgments, they are not easy to update, change, or modify. In contrast, they need help to easily update, alter, or modify. Irrevocable trusts serve as long-term planning and asset management tools. So, they need a time frame for keeping them open after your passing.

 

Best Ways to Distributing Trust Assets to Beneficiaries

Beneficiaries can receive distributions from a Trust Fund in three main ways:

 

 

Distribute assets to beneficiaries through outright distributions. –

It is easy and inexpensive to distribute assets to beneficiaries through outright distributions. In this scenario, assets will be available to beneficiaries without restrictions after paying the estate’s debts and taxes.

 

Staggered distributions –

Since administering the Trust assets over a longer period costs money, staggered distributions will be more expensive. When people want to trigger a distribution based on specific events, such as:

• An age,
• On a particular date,
• College graduation,
• Or a wedding,
• They use the staggered distribution method.

When minors are beneficiaries, staggered distributions are more common.

 

Distribute discretionary funds –

You can determine when and how to distribute discretionary funds based on the trustee you appoint. Trustees would be responsible for managing the trust and distributing assets. So, they would determine when beneficiaries would receive assets.

Much like an intricately choreographed dance, discretionary distributions, akin to staggered distributions, can lead to escalated administrative expenses due to the extended timeframe for the trust to be fully depleted.

 

What Is the Maximum Time A Trustee Has to Distribute Assets to Beneficiaries?

As a trustee, you must distribute assets as soon as possible. Depending on many factors, distributing assets from a revocable living trust can take a long time. In general, the distribution can take between 12-18 months. If the distribution is straightforward, it can take even less than 4-5 months.

So, regarding trust asset distribution, what can lead to further delays, making the process take longer than 18 months? Taxes and debts to cover can delay the process.

 

The real estate markets

There can be a delay when the real estate must be on the market before distributions occur. Property that requires repair or proves hard to sell can result in delays. When multiple pieces of property need to go up for sale, delays can even develop into multipliers.

 

Tax Return for Estates

Distributing trust asset distribution can be late if an estate tax return is necessary before making distributions. However, that requirement only applies to trust estates over $1 million.

 

Staggered distributions in trust terms

A trust administration is only complete once all distributions have been made. Beneficiaries and heirs will certainly experience delays when receiving their final distributions if a trust outlines terms of staggered distributions, which are preliminary distributions that will take place over a specific period.

 

Contests to build trust

If the beneficiaries believe they have grounds for challenging the trust document, they may decide to sue. If they don’t trust the lawyer who helped create the trust or believe the trust creator signed the document under undue influence, they may take action to challenge it.

Whenever a trust contest occurs in California, the probate court will handle the case, resulting in substantial delays as there will be no distributions.

 

In The Case of An Administration Lasting More Than 18 Months, What Should Take Place?

Suppose you don’t know of any extenuating circumstances following the trustor’s death. The trustee still needs to distribute assets to beneficiaries. Let’s say it’s been eighteen months since the trustor passed away. Does the law allow you to claim if you do not receive the information you deserve? Maybe you suspect the trustee of wrongdoing with trust funds.

As a first step, you should gather any information you can about the decedent, including a copy of their revocable living trust, any correspondence with the trustee, and any financial/accounting information you have received.

A trusted litigation attorney with experience in this field can offer sound legal advice. The first action your attorney will usually take is to send a request for information to the trustee or the lawyer representing them (if they have hired an attorney). To expedite the trust administration process and disclose previously withheld information, the recipients may find motivation upon receiving a demand letter.

Should the trustee fail to fulfill their obligations in administering the trust promptly or engage in misappropriation of trust funds, specific situations may necessitate obtaining a court order for the distribution of funds, restitution for stolen trust assets, and the replacement of the trustee.

 

Trust Distribution Requires Several Things to Happen.

Trustees must transparently distribute assets from trust accounts before beneficiaries can receive them.

Ultimately, the time it takes to distribute assets highly depends on their value and type. In addition to paying outstanding bills, taxes, and other liabilities, trustees must wait for the IRS to review their estate tax returns and send them a closing letter.

It may take time for trustees to accomplish these things. But trustees are legally required to provide beneficiaries with reasonable updates. Additionally, trustees have a responsibility to:

• In the case of a will, the Clerk of Court should receive it.
• Make creditor notifications
• If you plan to sell real estate, stocks and bonds are the best investments.
• Get a death certificate.
• For any questions regarding social security, contact them.
• Take stock of the trust’s assets and gather them together.
• Please make sure the trust files its taxes.
• Review the investments of your trust.
• Create a system for keeping records.
• Determine the beneficiaries and heirs of the estate and locate them.
• Provide payment for all administration expenses.

Additionally, we need additional paperwork depending on the complexity of the trust. In light of the complexity of this process, working with a premier CPA will be essential.

 

What Are the Legal Restrictions on A Trustee Not Distributing Assets to Beneficiaries?

The trust document’s terms determine what actions a trustee may and cannot take. The trust creator may give a trustee the authority to determine when and how much to distribute assets. If the trust allows a trustee to refuse to pay a beneficiary, it cannot distribute assets.

A trustee may delay distributions until a beneficiary reaches a majority. Or if the trust document specifies staggered distributions, this must follow the trust document.

 

If The Trustee Refuses to Distribute Assets, What Should You Do?

Beneficiaries or heirs may sue trustees for breaching their fiduciary duties if they do not distribute following the trust terms. Furthermore, legal action may be pursued if the trustee has mishandled assets or neglected to fulfill their legal obligation of providing beneficiaries with accurate financial accounting. Similarly, lawsuits may ensue if the trustee fails to meet timely payment of expenses and fees, rendering them unable to fulfill their financial responsibilities.

 

In The Case of a Trust, Can A Beneficiary Contest It?

In California, beneficiaries can challenge a trust through a legal proceeding called a “trust contest.” This refers to California Probate Code 17200, which permits a beneficiary to contest a trust based on the trust’s creation or funding.

Several reasons may lead a beneficiary to want to dispute a trust, for example:

• There was no execution of the trust instrument following the necessary legal formalities.
• The trust creator couldn’t make or change a trust because he lacked mental capacity.
• A fraudulent act, such as forgery, was used to establish or modify the trust.
• Inevitably, undue influence, duress, or coercion occurred to make or modify the trust.

The importance of recognizing that trust contests delay distributions for some time. Similarly, the contest period for most trustees is between 60 and 120 days after death (or an irrevocable cause of irrevocability) if the trustee timely sends out the required Notice of Irrevocability under Probate Code section 16061.7. If this notice arrives in time, the contest period can be shortened to 120 days after the notice is served. It is imperative to seek legal guidance before examining these timing issues due to their complexity and potential traps.

 

Obtain Legal Advice from Attorneysre.

Certain rights are available to you as a beneficiary, ensuring you receive the assets within a reasonable timeframe and protecting your inheritance. An attorney can help you if you’re concerned about handling a trust you’re a beneficiary of.

There are several ways in which a probate attorney can assist you, such as:

• Probating an estate,
• Engaging in the trust settlement process or challenging the legality of a trust or will.
• And disputing trustee and executor actions.

In addition to answering questions about the trustee’s actions, a probate attorney can help you understand your rights as a beneficiary.

With Attorney Real Estate Group’s experience in California trust administration cases, we can assist beneficiaries seeking to distribute their assets or trustees seeking help administering trusts.