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 assets isn’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 preliminary distribution to the beneficiaries before 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 an estate 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 someone brings 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 circumstances 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, contact Albertson & Davidson attorneys today!
