Disbursement of Funds to Beneficiaries of a Trust. A Quick Guide.

Disbursement of funds to beneficiaries, if authorized by the trust, should happen within the timeframe specified in the trust. Here are some examples of the different types of trust disbursement arrangements for beneficiaries:

• An immediate disbursement upon the death of the person who made the trust
• An immediate disbursement upon reaching a certain age (for example, 18 or 25)
• Disbursement of principal
• Disbursement of income
• A monthly disbursement
• Disbursement at some specific point in time

The possibility of disbursement of funds to beneficiaries is not the same in every trust.  Some trusts authorize disbursement to beneficiaries, some do not. You would have to have an attorney read the trust document to find out for sure, presuming that the trust document is not unclear (as some are). Some beneficiaries are entitled to disbursement of funds, some are entitled only to disbursement of income, and some are not entitled to any disbursement, possibly for a long time. Some beneficiaries are not entitled to any disbursement at all, such as contingent beneficiaries.

If you are concerned with disbursement of funds to beneficiaries of a trust and you need to consult an attorney, we at the Law Offices of Albert Goodwin are here for you. You can call us at 212-233-1233 or send us an email at [email protected].

Every month of delay of disbursement of funds costs the beneficiary loss of use and enjoyment of their share of the trust. If the trustee is taking too long, a trust attorney can go a long way in showing them that distributing the trust to the beneficiaries should be a priority.

As we said, disbursement to beneficiaries of a trust depends on the trust language. If you don’t have a copy of the trust, you can ask the trustee to provide a copy of the trust to you. If the trustee refuses, you can bring a court proceeding to compel the production of a trust.

On one hand, it is understandable that the trustee has many things they have to get to. On the other hand, a diligent beneficiary should not sit by idly for this entire temporal period, especially if he believes that a trustee is failing the nonwaivable duty to “exercise reasonable care, diligence, and prudence.”^[1] For example, a court may disqualify a trustee on grounds such as commingling funds, mismanagement, dishonesty, and substance abuse.^[2]

New York courts will step in if the trustee “endangers the trust” or “seriously impedes its administration.”^[3] If the trustee is non-responsive a beneficiary can send a written demand for an accounting and disbursement of funds to beneficiaries. This request serves two purposes. First, it may be a requirement to commence any proceeding in court against the trustee.^[4] And second, it gives the trustee notice that you are serious—which may give way to a faster disbursement. If the trustee does not respond to this written demand, the beneficiary may then commence a motion to compel accounting with the court.^[5] New York courts generally compel such an accounting if there is “good cause” to do so.

It is a fine line between giving the trustee deference and desiring to receive the inheritance promptly. When a beneficiary knows that a trustee is mishandling the trust, a court should immediately get involved. In many cases, however, a quarrel with the trustee is not in the best interests of either the beneficiary or the trust. Therefore, it is best to discuss disbursement of funds to beneficiary with a competent New York trust attorney.

If you would like to discuss disbursement of funds to beneficiaries of a trust, we at the Law Offices of Albert Goodwin are here for you. You can call us at 212-233-1233 or send us an email at [email protected].

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References

[1] N.Y. Est. Powers & Trusts Law § 11-1.7(a)(1).

[2] N.Y. Surr. Ct. Proc. Act Law § 711.

[3] In re Braloff, 162 N.Y.S.2d 620, 623 (2d Dep’t 1957), affirmed, 173 N.Y.S.2d 817 (1958).

[4] N.Y. Surr. Ct. Proc. Act Law § 2102(1).

[5] See id.§ 2205, 2206.