How long does it take to settle a trust and what can be done if it's taking too long?
UPDATED: June 19, 2018
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How long it takes to settle a trust after the creator or grantor dies depends on what needs to be done. It usually takes a few months, but it could take much longer. If the trustee has to value and sell numerous assets, if creditors have made demands on the trust, or if there is a complicated tax situation, the process can take some time.
Because the outcome can sometimes be unpredictable, estate planning is a messy business. This is especially true where testamentary trusts are involved. Not only does the will have to be proven valid, but the intent of the trust must be clearly defined. If the will was written without anyone’s knowledge, this becomes even more difficult. Anything from a pre-existing will to a missing family member adds to the length of the probate process. Even once the probate proceedings prove everything is valid, the successful selling of assets and funding of the trust can take even more time as this is completely dependent on the economy.
Creditor Rights to Assets
During the probate period, a will becomes public record, and following this, creditors come out of the woodwork. Under current law, creditors have access to the estate’s property before the trustee. This means that any remaining wealth meant to fund the trust could simply disappear in order to pay the person’s remaining debts. Common types of creditors that may appear during a probate proceeding include the IRS, home loan banks, hospitals, and occasionally the state welfare agency.
Available Remedies to Help Speed the Settling Process
If a trust has not been settled in a reasonable time, beneficiaries do have remedies. It’s possible in this situation for one or more beneficiaries to go to court and ask that the trustee be replaced or forced to act, but this may not be a good idea unless the situation is very serious. It's important to be sure the trustee is really acting unreasonably as the court will only remove a chosen trustee if that trustee really has acted badly or negligently. If the trustee successfully defends against an attempt to be removed, the costs of that defense can be taken out of the trust assets and the dispute will prolong or slow the trust settlement process.
Settling Family Trusts - Disputes among Relatives
Disputes over the time it takes to settle a trust or an estate often arise between immediate family members. For example, if one sibling is named as the trustee, the others might feel he or she is inefficient in resolving the trust. A trust estate may seem straightforward at first glance, but they can be surprisingly complicated and beneficiaries may get impatient when things aren’t resolved as quickly as they had expected.
In addition, settling can also be prolonged if the trustees are not clearly defined. For instance, if the will simply states that “all offspring” of the donor are trustees, this will take time to prove and define. However, if family members are clearly named in order, the court will likely take less time in the settling process.
When a Charity or Church Is Involved
Another common challenge arises when funds are denied to family members and instead given to a charity or church. These situations can take as long as a decade to resolve. While everyone has their own reasons for donating, this can leave family members feeling hurt and not in agreement with the decision. Additionally, if the individual become especially involved with the organization immediately prior to their death, there could be cause for challenges due to duress or undue influence on the deceased. If you are planning on establishing a trust for a charity or church, set it up as a living trust so that challenges cannot take place.
Avoiding Common Challenges in Settling a Trust
Not all trusts or beneficiary families have to go through the court system upon the death of the donor. While testamentary trusts (trusts placed in wills) always go through probate and must be set up after the person’s death, inter vivos (or living trusts) do not. A living trust is set up and completely funded before death, so there is nothing to settle or challenge. The trust runs smoothly from the day of setup and the court is never the wiser.
For more information on testamentary or living trusts, contact an estate planning attorney. An attorney can help you determine the best options for your particular situation. An attorney’s expertise and clear and accurate drafting of a trust can save your family much heartache and money in the long run.