How do trust funds pay out is an important issue for the beneficiaries and the trustee. Trust funds that were properly transferred to a revocable living trust or irrevocable living trust are not subject to probate and pay out in accordance with the terms of the trust.
How Do Trust Funds Pay Out: What Beneficiaries Should Know
After the death of the person who made the trust, the trustee follows instructions set forth in the trust which tells the trustee how to manage, handle and distribute the trust assets to the beneficiaries. The trustee may have to make an accounting of the decedent’s assets. If there are any assets that are discovered that have not been transferred to the trust, the trustee must advise the executor or personal representative of the estate to initiate a probate proceeding to transfer assets that are not included in the trust.
Frequently, a spouse may be the trustee and also the executor of an estate. Assets that may be included in a trust pay out include:
- Real property
- Stocks, bonds and investment accounts
- Jewelry and collectibles
- Automobiles and other items of value
The trust assets are paid out to the heirs of the decedent in accordance with the terms and conditions of the trust and not the decedent’s will. On the other hand, any assets that are not properly passed to the trust and that are held in the sole name of the decedent will be paid out in accordance with probate rules.
With a living revocable trust, the trust owns the assets, but the donor can revoke or change the trust and has control over managing and spending the assets during the donor’s lifetime. With an irrevocable trust, the trust owns the assets and the donor cannot use the assets for the donor’s benefit or transfer assets from the trust to the donor’s personal accounts.
What a Trustee Should Know
Being appointed trustee means that you have to take on a substantial fiduciary duty. Failure to act responsibly and in accordance with the law could mean that you could be individually liable for mistakes you made. Before having the trust pay out, you should consult with an estate attorney. You can schedule a consultation with Albert Goodwin at 212-233-133.
One of the first things you should do when it’s time for the trust to pay out, such as after death of the person who made the trust is to find the trust paperwork, if you haven’t gotten it already. Once you have this, you will have an idea of who the beneficiary or beneficiaries are and which property is going to be included in the trust pay out. It is essential to find these things out as soon as you can.
Once you have the trust document, you should notify all the beneficiaries of the trust (unless the trust states otherwise) and explain to them how trusts pay out. After death of the person who made the trust, if the trust allows, you should always keep in contact with the beneficiaries and give them periodic updates as to what is happening with the trust, along with giving accountings from time to time.
Once you have notified the beneficiaries and explained to them how trusts pay out, you will want to get a tax ID number and a death certificate. These things, along with the trust instrument are necessary to do various steps later.
Once you have gathered up the paperwork necessary to do your duty as trustee, you will want to gather up trust property and figure out what the value was as it was on the day the grantor died. For accounts that contain liquid assets, such as bank accounts, you may want to join all the accounts into one for simplicity’s sake. If personal property and real property is going to be used to fund the trust, you will want to secure all of that property and make sure that it is safe from harm or theft. Remember that you have a duty to pay all bills related to trust property and to insure property such as jewelry, cars or houses so that the trust doesn’t lose their value for some reason.
After all the trust assets are gathered up it is the duty of the trustee to pay out those trust assets and funds fairly according to the trust document’s terms. This could mean that the trustee has to liquidate some assets before paying them out. The trustee would also be responsible for investing those assets in a cautious and diverse manner so that the trust maintains its value.
Being named trustee means that a fiduciary duty is created, meaning that it is in the trustee’s be interest to hire a New York City estate attorney to be sure that all the duties set forth by the trust and under New York law is met. A trustee must work on behalf of the beneficiary first, taking special care to not to engage in self-dealing or in a way that represents a conflict of interest. Your attorney is the best one to give you guidance on the proper way to handle the trust and to pay out trust assets.
Please have in mind that the actions described here are general. Many things depend on what is written in the trust document itself. For specific advise on the administration of the trust where you are a trustee, and for more information on how do trusts pay out, do not rely on the advice in this article but be advised by a trust attorney. If you are a trustee of a trust of a recently deceased individual and you are structuring the distribution of of trust funds after death of the person who made the trust, your best strategy would be to hire a New York estate attorney who is experienced in helping trustees. Call the Law Offices of Albert Goodwin at 718-509-9774 and schedule a consultation.