How Trust Assets Are Distributed After Death in New York: Timeline, Steps and Beneficiary Rights

By Albert Goodwin, Esq., New York estate and trust attorney.

This page is written for two readers. The first is the successor trustee of a New York revocable (living) trust whose grantor has just died and who needs to know what to do, in what order, and under which New York statutes. The second is the beneficiary who wants to know when the money arrives and what can be done in Surrogate's Court if it does not. The focus here is the wind-up of a revocable trust after the grantor's death. For a beneficiary's right to see the trust document and the books, see beneficiaries' rights to trust information. For suing a trustee who has mishandled assets, see breach of trust.

What happens to a New York revocable trust when the grantor dies

A revocable trust becomes irrevocable at the moment of the grantor's death. Nobody can amend it after that. EPTL 7-1.9 allows the creator of a trust to amend or revoke it with the written, acknowledged consent of all beneficiaries, but the statute requires the creator to act, so it is unavailable once the creator is dead. The successor trustee named in the instrument steps into the office, and the trust terms, not the death itself, decide who receives what and when.

Most New York revocable trusts direct the trustee to pay debts, expenses and taxes and then distribute the balance outright. Many do something more involved: a share held in further trust for a child until a stated age, a lifetime trust for a surviving spouse, or a supplemental needs trust under EPTL 7-1.12 for a beneficiary with a disability. The first job of the successor trustee is to read the dispositive provisions and identify which of these the grantor chose.

Does a trust have to go through probate in New York?

Assets that were actually transferred into the trust during the grantor's life do not go through probate. Under EPTL 7-1.18, a lifetime trust is valid only as to assets that were titled in the trustee's name or, for assets that cannot be registered, listed in a signed and acknowledged schedule. A brokerage account still in the grantor's individual name, or a house whose deed was never recorded in the trustee's name, is not a trust asset. Those assets pass under the grantor's will. If the will is a pour-over will under EPTL 3-3.7, the executor collects them through probate and then transfers them to the trustee. If the left-out assets total $50,000 or less (excluding real property), a small estate proceeding under SCPA Article 13 may be used instead of full probate. For what belongs in a trust and what does not, see assets that can and cannot go into a revocable trust, and for the probate side of the timeline, see a sample NYC probate timeline.

Step-by-step: what the successor trustee does after the grantor's death

The sequence below reflects how a New York revocable trust is normally administered. The timing notes are typical ranges, not legal deadlines, except where a statute or tax filing date is cited.

1. Obtain certified death certificates (first two weeks). In New York City, the funeral director orders them from the NYC Department of Health and Mental Hygiene; outside the City, from the local registrar or the New York State Department of Health. Order several. Every bank, brokerage and title company will want an original.
2. Locate the trust instrument and all amendments, and accept the trusteeship (first month). Confirm that you are the named successor and that any conditions on your succession (for example, the resignation or incapacity of a prior trustee) have been documented. Sign a written acceptance of trusteeship. A lifetime trust must have been signed and either acknowledged before a notary or witnessed by two witnesses (EPTL 7-1.17); if the instrument was never properly executed, see a lawyer before acting on it.
3. Obtain an employer identification number for the trust (first month). During the grantor's life, the trust reported under the grantor's Social Security number. That ends at death. Apply for an EIN on IRS Form SS-4 and give it to every institution holding trust assets. The trust is now a separate taxpayer.
4. Notify the beneficiaries (first one to two months). New York has not adopted the Uniform Trust Code, so there is no statute requiring notice within a fixed number of days. A trustee's duties of loyalty and candor still require it. Tell each beneficiary that the grantor has died, that you have accepted the trusteeship, and what the trust provides for that beneficiary. Give beneficiaries a copy of the provisions that affect them.
5. Marshal the assets (months one through four). Retitle accounts to you as successor trustee. Real property already deeded to the trust does not need a new deed, though a title company will ask for the death certificate and an affidavit or certification of trust at the time of any later sale. Make a list of anything in the grantor's individual name and coordinate with the executor under the pour-over will.
6. Obtain date-of-death valuations (months one through six). Request date-of-death statements from brokerages and banks. Hire appraisers for real property, closely held business interests, art and jewelry. These figures set the stepped-up income tax basis under IRC 1014 and are required for any estate tax return.
7. Identify debts, expenses and taxes (months two through seven). A revocable trust does not protect assets from the grantor's creditors (EPTL 7-3.1). After death the trust is answerable for the grantor's debts if the probate estate cannot pay them. If an estate is open, the executor's seven-month creditor window under SCPA 1802 is a useful marker. Reasonable trustees hold a reserve until the debts and the tax picture are clear.
8. File the tax returns. The decedent's final Form 1040 and New York IT-201 are due the following April 15. The trust files a fiduciary income tax return (federal Form 1041 and New York Form IT-205) for each year it has gross income of $600 or more. If the gross estate is large enough, the New York ET-706 and federal Form 706 are due nine months after death, with a six-month extension available. Tax is covered in more detail below.
9. Make interim distributions (often months six through twelve). Once liabilities are known, the trustee can distribute part of each beneficiary's share while keeping a reserve for taxes, final expenses and the trustee's own commissions. Nothing in New York law prohibits a partial distribution; the trustee simply remains personally exposed if the reserve proves too small.
10. Prepare an accounting. Before final distribution, the trustee accounts for everything received, spent and held. Most trusts settle on an informal accounting agreed to by the beneficiaries. If a beneficiary will not agree, the trustee can petition for judicial settlement under SCPA Article 22. See trust and estate accountings.
11. Make final distribution against receipts, releases and refunding agreements. Each beneficiary signs a receipt for what was received, a release of the trustee, and an agreement to refund a proportionate share if an unknown debt or tax later surfaces.
12. Close the trust. File the final Form 1041 and IT-205 marked as final returns, close the accounts, and keep the records. Beneficiaries who received a Schedule K-1 will need those records to prepare their own returns.

How long does distribution take in New York?

There is no statutory deadline for distributing a trust in New York. The standard is a reasonable time in light of the trust's assets and liabilities. The table shows what is realistic.

A trustee who holds assets for a long time is not free to let them sit idle. The Prudent Investor Act, EPTL 11-2.3, requires the trustee to invest and manage trust assets prudently during the administration, including the period before final distribution.

Who gets what: reading the distribution provisions

Distribution provisions in New York trusts fall into four broad categories. The trustee's room to decide, and the beneficiary's remedy, differ for each.

New York courts do not substitute their own judgment for the trustee's on a discretionary distribution. They will step in when the trustee abuses the discretion. In Matter of Flyer, 23 N.Y.2d 579 (1969), the Court of Appeals confirmed that a court may direct a trustee to make a payment where the trustee's refusal amounts to an abuse of discretion measured against the purposes of the trust. In Matter of Wallens, 9 N.Y.3d 117 (2007), the Court held that even a grant of sole discretion does not relieve the trustee of the duty to act in good faith and in the beneficiary's interest, and the trustee was required to justify payments from the trust in a judicial accounting. The question in every discretionary dispute is the grantor's intent as expressed in the instrument. Suppose a trust allows distributions for a beneficiary's education and the trustee pays tuition but refuses to pay for a dormitory room. A court would read the whole instrument to decide whether "education" was meant to include the cost of living while in school, and would ask whether the trustee actually considered the request or simply ignored it.

Corporate trustees apply written distribution policies to HEMS requests. If a bank or trust company is the trustee, see bank as a trustee.

Income versus principal, and who pays the tax

Allocating receipts under the New York Principal and Income Act

New York's version of the Uniform Principal and Income Act is EPTL Article 11-A. It tells the trustee which receipts are income and which are principal. Interest, dividends and rent are income. Proceeds of selling a trust asset, stock received in a split or spin-off, and the assets the grantor placed in the trust are principal. The Act also allocates expenses: by default, half of the trustee's regular commissions and half of the cost of an accounting are charged to income and half to principal. This matters when one beneficiary receives the income and another receives the principal at a later date. Where the instrument allows, a trustee may also elect the 4% unitrust method under EPTL 11-2.4 instead of tracking traditional income. In a simple wind-up where everything goes outright to the same people, the allocation affects the tax reporting more than the final dollar split.

Stepped-up basis at the grantor's death

Assets held in a revocable trust are included in the grantor's gross estate for federal estate tax purposes, so they receive a new income tax basis equal to fair market value at the date of death under IRC 1014. If the grantor bought a Brooklyn brownstone for $200,000 and it is worth $1,400,000 at death, the trust's basis becomes $1,400,000. A sale by the trustee a few months later for $1,420,000 produces a taxable gain of roughly $20,000 after selling costs, not $1,200,000. The date-of-death appraisal in step 6 above is the proof of that basis.

How trust income is taxed: DNI and Schedule K-1

Once the trust has its own EIN it files Form 1041 and New York Form IT-205. The tax on trust income is split between the trust and the beneficiaries through the concept of distributable net income (DNI). In general terms, income the trust distributes during the year is deducted by the trust and taxed to the beneficiaries who receive it. Each beneficiary gets a Schedule K-1 showing his or her share of interest, dividends and capital gains, and reports it on his or her own return. Income the trust keeps is taxed to the trust at compressed brackets: a trust reaches the top federal rate of 37% at a little over $15,000 of taxable income, a threshold an individual does not reach until several hundred thousand dollars. For that reason trustees usually distribute income to beneficiaries rather than retain it. IRC 663(b), the 65-day rule, lets a trustee treat a distribution made in the first 65 days of the new year as if made in the prior year, which gives the trustee until early March to decide how much income to push out.

Three further points matter to beneficiaries:

• Principal is not income to the beneficiary. A beneficiary who receives $300,000 of the grantor's original trust property receives an inheritance, not taxable income (IRC 102). Only the DNI carried out on the K-1 is taxed to the beneficiary.
• Distributions in kind carry over the trust's basis. If the trustee hands a beneficiary 500 shares of stock rather than selling them, the beneficiary generally takes the trust's stepped-up basis under IRC 643(e) and pays capital gains tax only on a later sale.
• The IRC 645 election. If there is also a probate estate, the executor and trustee can elect to treat the revocable trust as part of the estate for income tax purposes for a limited period. This allows a fiscal year and other estate-only rules and often simplifies the first year's filings.

For New York purposes, a trust whose grantor was domiciled in New York at death is a resident trust, but under Tax Law 605(b)(3)(D) it owes no New York income tax in a year in which it has no New York trustee, no New York real or tangible property, and no New York source income. Most trusts administered by a New York trustee will owe New York tax on their retained income.

Debts and New York estate tax come before distribution

New York imposes its own estate tax, separate from the federal tax. A New York estate tax return (Form ET-706) is required when the gross estate plus includible gifts exceeds the basic exclusion amount, which is indexed each year and is $7,160,000 for deaths in 2025. Trust assets are counted because the grantor retained the power to revoke. New York has what practitioners call the cliff: if the taxable estate exceeds 105% of the exclusion amount (about $7,518,000 in 2025), the entire estate is taxed from the first dollar, not just the amount over the exclusion. Rates run from 3.06% to 16%. New York does not allow a surviving spouse to use a deceased spouse's unused exclusion; portability exists only at the federal level. A federal Form 706 is required only if the gross estate exceeds the federal exemption, which is far higher ($13,990,000 for deaths in 2025).

Both returns are due nine months after death. The trustee should not make final distribution until the New York Department of Taxation and Finance has issued its closing letter or the audit period has run, because the trustee can be personally liable for tax paid out to beneficiaries. Unless the trust or will says otherwise, EPTL 2-1.8 apportions estate tax among the beneficiaries in proportion to what each receives, so each share bears its own tax.

Trustee commissions under SCPA 2309

A trustee of a New York lifetime trust is entitled to statutory commissions under SCPA 2309 unless the instrument sets a different rate or the trustee waives them. Two components apply to a trust being wound up after death:

• Annual commissions on the principal held: $10.50 per $1,000 on the first $400,000, $4.50 per $1,000 on the next $600,000, and $3.00 per $1,000 above $1,000,000, prorated for partial years and subject to the statute's notice requirements.
• Paying-out commissions of 1% of the principal distributed, allowed on the settlement of the trustee's account.

Illustration: a trust holding $1,500,000 that is administered for one year and then fully distributed would support annual commissions of $8,400 ($4,200 + $2,700 + $1,500) and a paying-out commission of $15,000, for a total of $23,400 before any attorney's fees or accountant's fees. Where two trustees serve and the principal exceeds $400,000, each may take a full commission. Corporate trustees instead charge according to their published fee schedules under SCPA 2312. Commissions are taxable income to the trustee. A family member who is both trustee and the main beneficiary often waives commissions, because the same dollars received as an inheritance are not taxed. A trustee found to have breached the trust may be denied commissions by the court.

Distributing particular kinds of assets

Once the trustee knows who receives what and has set a reserve, the mechanics depend on the asset.

• Cash and bank accounts. Paid by trust check or wire against a signed receipt.
• Stocks, bonds and funds. Either transferred in kind to the beneficiary's own brokerage account or sold and the proceeds paid out. If the trust directs equal shares, an in-kind division must be equalized by value as of the distribution date, not the date of death.
• Real property. If the trust gives a specific property to named beneficiaries, the trustee signs a trustee's deed to them and records it, filing the TP-584 and RP-5217 (and, in New York City, the NYC-RPT) even though no transfer tax is normally due on a distribution without consideration. If the trust instead directs the trustee to sell and divide, or is silent, the trustee's power of sale under EPTL 11-1.1 applies unless the instrument restricts it. Co-op apartments add a step: the board must approve any beneficiary who will hold the shares as an owner-occupant. If one beneficiary wants to keep the property and buy out the others, see beneficiary buying property from a trust.
• Residuary shares expressed as percentages. These cannot be computed until the trustee knows the net value of the trust after debts, taxes, expenses and commissions, which is why an accounting precedes the final distribution.

A trustee cannot depart from what the instrument says because the beneficiaries would prefer something else. Under EPTL 7-2.4, every sale, conveyance or other act of the trustee in contravention of the trust is void. If all beneficiaries of a specifically devised property are adults, competent, and agree that they would rather have cash, the clean course is for the trustee to deed the property to them as the trust directs and for them to sell it, or for the trustee and all beneficiaries to sign a written agreement that the trustee may sell and distribute proceeds in lieu of the deed. If any beneficiary is a minor, is under a disability, or is unborn, court approval is needed.

The accounting, receipts and releases

Before the final distribution, the trustee gives each beneficiary an accounting showing the assets at death, all receipts and disbursements, the commissions taken and the proposed distribution. Beneficiaries who are satisfied sign a receipt, release and refunding agreement, and the trustee distributes. A beneficiary who is not satisfied is not required to sign and may instead insist on a judicial accounting in Surrogate's Court, where objections are heard and the trustee's fees and conduct are reviewed. The formats, the costs, and the rules on when a release can later be set aside are covered on our trust and estate accounting page.

What a beneficiary can do when the trustee will not distribute

Delay is the most common complaint about trustees after a death. Some delay is proper: the trustee needs the tax picture before paying out. Delay becomes actionable when the trustee has no reserve to justify it, refuses to explain, or treats a mandatory share as if it were discretionary. The Surrogate's Court has jurisdiction over lifetime trusts under SCPA 1509, and venue under SCPA 207 lies in the county where the trust assets are located, where the grantor was domiciled, or where a trustee resides. In practice that means the Surrogate's Court in New York, Kings, Queens, Bronx, Richmond, Nassau, Suffolk or Westchester County for most trusts handled by this office.

1. Written demand. Send the trustee a dated letter asking for the status of administration, an inventory, and a schedule for distribution. Courts expect to see this before a petition is filed, and the letter fixes the date from which unreasonable delay is measured.
2. Petition under SCPA 2102. An interested person may petition for relief against a fiduciary, including an order directing the trustee to supply information or to pay over a distribution that is due under the instrument. For a mandatory share this is often the fastest route.
3. Petition to compel an accounting under SCPA 2205 and 2206. The court orders the trustee to file a formal account within a set time. Once the account is filed, the beneficiary files objections, and the court can disallow improper expenses, deny or reduce commissions, and surcharge the trustee personally for losses caused by the delay or mismanagement. Courts have discretion to charge a trustee interest on sums wrongfully withheld.
4. Removal. A trustee who disobeys a court order, wastes assets, or is otherwise unfit may be removed under SCPA 711 and EPTL 7-2.6, with a successor appointed to complete the distribution. Removal is a serious remedy and courts use it when lesser relief will not protect the beneficiaries.

A trustee who defends an accounting in good faith is normally reimbursed from the trust for legal fees, which reduces what every beneficiary receives. A trustee who is found to have breached the trust can be ordered to bear those fees personally. The grounds for surcharge and removal are discussed on breach of trust and breach of fiduciary duty.

Illustration

The following is a hypothetical, not a report of any client's matter. A Queens grantor dies in March leaving a revocable trust holding a two-family house worth $1,100,000 and $400,000 in brokerage accounts, to be divided equally between two adult children, one of whom is the successor trustee. There is no estate tax return because the estate is under the New York exclusion. The trustee obtains an EIN in April, has the house appraised in May, lists it in June and closes in October. Dividends and interest of about $9,000 are earned during the year; the trustee distributes them in December so that each child reports $4,500 on a K-1 rather than having the trust pay tax at the compressed brackets. After closing costs, debts and a reserve, the trustee makes an interim distribution of $600,000 to each child in November, circulates an informal accounting in January, obtains signed releases in February, and distributes the reserve in April, roughly thirteen months after death. Had the non-trustee child refused to sign the release and demanded a judicial accounting, the same trust would likely have closed six to twelve months later and at greater cost to both shares.

Frequently asked questions

How long does a trustee have to distribute trust assets in New York?

There is no fixed deadline in the EPTL or SCPA. The trustee must act within a reasonable time given the assets and liabilities. Six to twelve months is common for a simple trust; eighteen months or more where an estate tax return is required or real property must be sold. A trustee who cannot explain a longer delay is exposed to a petition to compel distribution or an accounting.

Can a trustee withhold a distribution?

Yes, for legitimate reasons: unpaid debts, an open estate tax return, pending litigation, or a provision that makes the share discretionary or payable at a later age. A trustee cannot withhold a mandatory share indefinitely, cannot refuse to say why, and cannot condition payment on the beneficiary signing a release without first providing an accounting.

Does a trust have to go through probate in New York?

Not for assets that were properly transferred into the trust before death. Assets left in the grantor's individual name pass through probate (or a small estate proceeding if they total $50,000 or less) and are then poured over into the trust under the will.

Does the trustee get paid for distributing the trust?

Yes, unless the trust instrument says otherwise or the trustee waives. SCPA 2309 provides annual commissions on the principal held and a 1% paying-out commission on principal distributed. The instrument can set a different fee, and corporate trustees charge their published schedules under SCPA 2312.

Do beneficiaries pay income tax on what they receive from the trust?

Not on principal. Income earned by the trust after death and distributed to a beneficiary is reported to the beneficiary on a Schedule K-1 and taxed on the beneficiary's return. Income the trust retains is taxed to the trust. New York estate tax, if any, is paid by the trustee before distribution and, under EPTL 2-1.8, is charged against each share proportionately unless the instrument directs otherwise.

Can a beneficiary be forced to sign a release?

No. A beneficiary who declines to sign can require the trustee to account judicially under SCPA Article 22. A release signed without a fair disclosure of the trust's finances can later be set aside, which is why careful trustees provide a full informal accounting before asking for one.

Which court handles disputes about a lifetime trust?

The Surrogate's Court, under SCPA 1509, in the county determined by SCPA 207. The Supreme Court also has concurrent jurisdiction, but trust accountings and petitions against trustees are almost always brought in the Surrogate's Court.

What if the trustee named in the trust has died or refuses to serve?

Most instruments name an alternate. If none is named or willing, an interested person petitions the Surrogate's Court to appoint a successor trustee under SCPA 1502. Until a trustee is in office, no one has authority to distribute.

Speak with a New York trust attorney

If you are a successor trustee who needs the administration done correctly, or a beneficiary who has waited too long for a distribution, the Law Offices of Albert Goodwin can help. We handle trust administration and trust litigation in the Surrogate's Courts of New York City, Long Island and Westchester, with offices in Manhattan, Brooklyn and Queens. Call 212-233-1233 or email [email protected]. For an overview of our trust practice, see trust attorney in NYC.