Is there a time limit on distributing trust money?
Is there a time limit on distribution of family trust monies? How long is considered enough time until funds are distributed after all the creditors have been paid? Also, should I expect a full accounting of the trust after the death of both parents from the trustee?
Ã¢â‚¬¨A true family trust takes the meaning of "trust" to its outermost limits -- usually naming one or more people to act as trustees, and giving them the discretion to distribute trust income in any way they see fit.
Such trusts are usually set up as rather sophisticated tax managing devices, as trustees are free to distribute trust income in proportions that take best advantage of each beneficiary's personal tax rate. The beneficiaries must pay the tax on distributions made to them. So in true family trusts, there is generally not a specific time limit on final distributions.
For other types of trusts that are often confused with family trusts, such as living trusts that name family members as beneficiaries, trustees are generally responsible for distributing trust assets "within a reasonable time." This is a rather loose standard. Beneficiaries who suspect the trustee is foot-dragging or being inattentive may go to a local court to have the charges investigated. But it is usually more expedient, and far cheaper, if the trustee can be convinced to work with the beneficiaries peacefully.
By law, the trustee has a duty to keep the beneficiaries "reasonably" -- that annoying word again -- informed of the trust and its administration. A beneficiary can request that the trustee report information about the trust's activities that relate to the beneficiary's interest.
If the trustee does not provide this information voluntarily or ignores a beneficiary's request for it, the beneficiaries can petition a court to request that the trustee file a formal accounting of the trust.
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