Trustee Guidance: How to Distribute Trust Assets

Trustees are responsible for managing assets involved with the estate of another individual according to a trust agreement. One of the most important functions of the trustee is distributing the trust assets according to the wishes of the creator of the trust (trustor) as set forth in the trust agreement.  With proper planning, a trustee will be able to navigate the distribution of trust assets with the assistance of a bank, lawyer, or financial adviser either appointed by the trustor or hired by the trustee to manage the legal details.

Distribution of Trust Assets

As directed by the trustor, upon a specified event, such as the death of the trustor or a beneficiary attaining a certain age, the trustee is responsible for the accounting and possible distribution of trust assets to beneficiaries. The more complicated the estate, the more likely this is done with guidance from an attorney or CPA.

The information provided below is a basic outline of the distribution process, and should help prepare a person for a role as trustee. Keep in mind as you read that all situations are unique and advice from an experienced lawyer or financial adviser is always preferred.

The Process of Distributing Trust Assets

The following checklist highlights the steps you as a trustee must satisfy when distributing trust assets:

  1. Familiarize yourself with all aspects of the trust agreement.  The trust agreement will include vital information such as your role as a trustee, the roles of others in the distribution process (lawyers, co-trustees, etc.), and the terms by which the estate is meant to be distributed.

  2. Contact all beneficiaries listed in the trust agreement. You should send an official written communication notifying beneficiaries that the event the trustor specified as triggering distribution has occurred and that you, as trustee, are beginning the process of distributing the trust assets per the trust agreement.

  3. Inventory the current state of the trust itself. This means conducting a thorough inspection of all trust assets, contacting bank accounts and confirming balances, and ensuring that all items listed in the trust agreement are accounted for and properly notated as to their value and status. Some things, such as personal belongings, may not have specific values listed in the trust agreement because their values fluctuate over time; in these cases the items will have to be appraised at current market values

  4. Begin the process of officially transferring trust assets. Expect transparency as you work with the beneficiaries in order to do this. Property left to each person often needs to be transferred into his or her name, and appropriate documentation of the transfer must be completed and filed.

Trustee Discretion

There will be clauses in any trust agreement that leave certain decisions open to the discretion of the trustee or others involved in the distribution. Discretion is particularly common in situations where the trustor was a close family member, as spouse, child, or parent. A trustee should always consider discussing contentious options in full detail with any involved lawyers or financial experts. Being able to rely on experts can ensure that you as the trustee understands the implications of the decisions you make and know that you’re trying to make them correctly.

By consulting with others prior to distributing trust assets and making your decisions transparent to the trustees, you may also be protected from charges of breaching your duty as a trustee filed against you by beneficiaries upset with the distribution of trust assets.

Conclusion

Distribution of assets from a living trust can take weeks, or even years, depending on the complexity of the estate, the specifics of the trust agreement, and the circumstances and relationships between the trustee and the beneficiaries. Overall, however, trusts tend to be simpler, cheaper, and result in quicker resolution than distributing an estate through the probate process. Trusts are also private documents, sparing trustees from much of the publicity attendant on wills probate. In order to ensure a smooth distribution of trust assets, the trustor and the trustee should take time to adequately plan for distribution by making the trustor's wishes clear in the trust agreement and consulting with an experienced attorney when setting up a trust.