Distributions to Beneficiaries

The whole purpose of estate planning is to protect and provide for your family and loved ones, but it isn’t always that simple.

Distributing assets to beneficiaries is one of the more joyous aspects of the trust and estate administration process. But fiduciaries (Trustees and Personal Representatives) must be careful to make distributions properly.

People often make their Wills many years prior to their deaths. In such cases, property that is specifically bequeathed may not exist in the decedent’s estate. Or, the person to whom a specific bequest is made may no longer be alive. Further, even if specifically bequeathed property exists, and the beneficiary is available, the property may have to be sold to pay other debts of the estate. Each of these instances are governed by different legal concepts: ademption by extinction, lapse and anti-lapse, and abatement, respectively.

Trust are governed by their own terms, in addition to underlying legal principles. But a trust’s dispositive provisions can be anything but simple. For example, a Trustee may have the authority to make a distribution to a beneficiary for their health, maintenance, or support. Would buying the beneficiary a new dining room set be considered maintenance or support? What if there is a pooled trust for multiple beneficiaries? Can the Trustee use all of the money to benefit just one beneficiary? What if they have special needs that the others lack?

Before making distributions, it may make sense to seek counsel.