If your Trust requires a distribution to you, and you’re not receiving it, you may be wondering “how long will this take?” Unfortunately, there are times when a Trust distribution takes much longer than it should to be made.
Timeliness is Important
As with all things involving a Trustee’s actions, Trust distributions are required to be made within a “reasonable” time. But what’s reasonable? In our experience, many Trustees fail to understand that Trust distributions must be made timely. The duration within which a trustee is expected to fully distribute assetsisn’t set in stone and can be influenced by numerous factors. As per the California probate code, it’s the trustee’s responsibility to carry out the administration of the trust in accordance with the trust document’s conditions. Generally, for a standard revocable trust with a simple distribution term, the total distribution could take anywhere from 12 to 18 months.
Even if there are assets, such as homes, to be sold, the Trust should be wrapped up and distributed within eighteen months. Rarely should a Trust take two years, or more, to make a Trust distribution. Moreover, the Trustee can, and should, make a preliminarydistribution to the beneficiariesbefore the final Trust distribution. For example, if the Trust estate has $1 million in cash, the Trustee can distribute $750,000 to the beneficiaries and retain $250,000 in reserve. This is true even if there are other assets that need to be sold. It is not a distribute everything or nothing proposition, a partial distribution can (and should) be made.
When a Trust Administration May Take Longer
There are times when a Trust administration may reasonably take more than two years to be finalized. Such as when the Trustee is required to file anestate tax return with the IRS. But few Trustees are required to do that now that the estate tax exemption is $11.4 million per person. That means a married couple must have assets in excess of $22.8 million to be subject to estate tax.
The Trust distribution could also be delayed where someonebrings a Trust contest lawsuit. If the Trust, or an amendment to the Trust, is being challenged as invalid, then distribution cannot be made until the lawsuit is settled.
However, in Trusts where there are no lawsuits and no estate tax, the distribution must occur within a reasonable time. We have seen cases where a Trustee has waited five to ten years to make a Trust distribution, and there is no reason for that type of delay. Once you pass the eighteen-month mark on a routine Trust administration, you are probably exceeding the reasonable distribution date.
No Clear Timeframe for Trust Distributions in California Probate Court
Unfortunately, the California Probate Court does not provide a bright-line rule for Trust distributions. There is no definite timeframe stated in our statutes. But the reasonableness standard still mandates a distribution be made timely. In fact, a Trust that has no issues, and only cash, may be reasonably distributed within four or five months of the settlor’s death, not two years. It all depends on the circ*mstances of your case.
While we cannot tell you the exact date by which your Trust must be distributed, we can tell you that two years is too long in most cases. For personalized advice,contactAlbertson& Davidsonattorneys today!
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FAQs
Receiving inheritance money from a trust typically takes about 12 to 18 months.
How long does it take for trust fund to be distributed? ›
Receiving inheritance money from a trust typically takes about 12 to 18 months.
Can a trustee withhold money from a beneficiary? ›
Trustees are bound by the trust's terms and cannot unreasonably withhold a beneficiary's share, even amid disagreements. Failing to distribute assets as stipulated can lead to legal consequences, as trustees must prioritize the trust's intentions and beneficiaries' rights.
How do you hold a trustee accountable? ›
The Options for you to Hold the Trustee Accountable
- Contact the Trustee. ...
- Write a Letter. ...
- Hire an inexpensive lawyer. ...
- Hire an expensive lawyer. ...
- Hire an attorney who can take court action.
No Clear Timeframe for Trust Distributions in California Probate Court. Unfortunately, the California Probate Court does not provide a bright-line rule for Trust distributions. There is no definite timeframe stated in our statutes. But the reasonableness standard still mandates a distribution be made timely.
How does a trustee distribute assets? ›
Distribute trust assets outright
The grantor can opt to have the beneficiaries receive trust property directly without any restrictions. The trustee can write the beneficiary a check, give them cash, and transfer real estate by drawing up a new deed or selling the house and giving them the proceeds.
What happens if a trust does not distribute income? ›
Any interest income the trust distributes to beneficiaries can be deducted from its taxes. On the other hand, any interest income it does not distribute before the close of the year usually will be subject to trust income tax rates.
Can a trustee deny you money? ›
In certain cases, a trustee can refuse to pay a trust beneficiary. Most frequently, this happens when the beneficiary is asking for funds that the trust doesn't guarantee. This can also occur when there are not enough funds for what the beneficiary asked for. Some trusts give additional leeway to the trustee.
What happens if a trustee does not follow the trust? ›
If the trustee still will not comply, the court could hold him in contempt. If they continues to refuse to comply, the court may also remove them from his position. During an estate administration, a trustee's failure to comply with the trust terms is just one reason that beneficiaries may find themselves in court.
Who holds the real power in a trust the trustee or the beneficiary? ›
And although a beneficiary generally has very little control over the trust's management, they are entitled to receive what the trust allocates to them. In general, a trustee has extensive powers when it comes to overseeing the trust.
What Is Executor and Trustee Misconduct? Examples of executor misconduct and trustee misconduct include: Failing to provide accountings to beneficiaries. Favoring one beneficiary over another. Misappropriating or misusing estate or trust assets for personal gain.
Can a beneficiary sue a trustee personally? ›
The answer is yes. Suing the trustee if they have failed to competently do their job, breached their fiduciary duties, or caused harm to the trust is one of your most important rights as a trust beneficiary.
What is trustee negligence? ›
A trustee may be negligent if they violate their duty of care. Trustee negligence often results from the trustee not understanding their obligations to the trust beneficiaries.
What is the trust payout rule? ›
The payout rule stipulates that the beneficiary must take out the remaining balance over the owner's remaining life expectancy.
What is the 65-day rule for trust distributions 2024? ›
That means that a distribution of all or a part of trust or estate income by the trustee to a beneficiary made as late as March 5, 2024, can be treated for income tax purposes as if it had been made on December 31, 2023. (Note: the deadline for the distribution typically is March 6.
How do beneficiaries receive their money? ›
After your loved one has passed away, the executor of the will starts transferring assets to beneficiaries once the probate court has reviewed the will. While this is an easy way of receiving inheritance money, it may not be the fastest way. Sometimes, the court can take up to two years to complete this process.
What happens when you inherit money from a trust? ›
In either case, inheriting money held in trust means you will not receive an outright distribution of your inheritance to manage and spend yourself. Instead, you will have some right to use trust funds for specific purposes. In this situation, the criteria for distributions will be laid out in the trust document.
Do beneficiaries pay taxes on trust distributions? ›
When trust beneficiaries receive distributions from the trust's principal balance, they don't have to pay taxes on this disbursem*nt. The Internal Revenue Service (IRS) assumes this money was taxed before being placed into the trust. Gains on the trust are taxable as income to the beneficiary or the trust.
How is trust income distributed? ›
Trust distributions are essentially assets or income that get passed from the trust to beneficiaries. Distributions can be cash, stocks, real estate and other assets. If a trust owns a rental property, the monthly rental income the property generates would be distributed to the trust's beneficiaries.
