Trust Distribution Held Up

Q: I was told I am a beneficiary of my sister’s trust. She owned a home and other assets. Her son is the trustee but we don’t have a good relationship. I have been waiting for my distribution for several months. I have called several times and each time I call, they tell me they are trying to avoid a 37 percent tax liability. How long can they hold my distribution before sending me my share? What steps should I take to get my share?

A: The first step you should take is to figure out what your ownership interest is in the trust. If you are the sole beneficiary, you need to see the trust documents to confirm that. Once you know this information, you then can figure out what your rights are under the trust. If you’re one of many beneficiaries, you’re probably not the only one waiting for a distribution.

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Another consideration is what duties and responsibilities the trustee has in dealing with its holdings. It could be a complicated situation. Trustees can’t simply drop everything and distribute cash on demand. The trust may include provisions that provide otherwise.

In some situations, a trust may provide that a certain amount of money held by the trust be given to a specific beneficiary. That statement would make it clear that you get a certain amount of money. However, the trustee may need to pay expenses relating to your sister’s funeral and any other debts she owed. The trustee may need time to figure out what these expenses are before handing out money.

When the trust owns real estate, the trustee may have to go through a longer process to get things done. The trustee might need to clear out your sister’s personal belongings and get the property ready for sale. Once the property is ready, the trustee might engage the services of a real estate agent to sell the property and then wait until the property is closed to receive the funds from the proceeds of the sale. Even after that, you might not get a full distribution, as there may be a mortgage, home equity loan or line of credit, mechanics’ liens against the property or property taxes that have to be paid first.

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You mentioned that the trustee was delaying to avoid paying certain taxes. We’re not sure what those taxes might be. The trustee might have a legitimate interest in waiting but you won’t know what that is unless you understand what your rights are and what you might be getting from the trust.

As a beneficiary, you should have the right to see the trust document and understand how it works. It should also explain how and when distributions will be made. Have you received a copy of the trust documentation? If not, you should ask for a copy. You can then get a better understanding of what’s going on and whether the several months you have waited is reasonable.

Sometimes estate issues take time. It can take months, if not years, to get all of the assets distributed. Let’s say the trust holds bank accounts and your sister’s home. Once that home is sold, we’d expect to see the trustee distribute the proceeds from the trust shortly after the sale. That is, if the trust agreement indicates that money is to be paid to the beneficiaries at that time.

We mention that because your sister might have provided that the trustee has discretion as to when he can or should distribute money from the trust. Your sister might have instructed the trustee to pay a certain amount of money to you or anybody else over time, when beneficiaries reach a certain age, or upon the occurrence of certain events.

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For example, some living trusts will defer paying money to minor children or young adults until age 25. They and may even pay money our over decades. This would mean a beneficiary might receive some money from a trust at 25, more at 35 and the last amount at 45.

Start by getting a copy of the trust. If you don’t understand what it says, you may want to check with an estate attorney. Once you have an understanding of the trust terms, you can then figure out if the information you are getting from the trustee is correct. You can then wait until certain events happen knowing that your share will come at that time. If it doesn’t, the estate attorney can advise you on next steps.