Handling assets in a trust is a major commitment that involves the management of assets until beneficiaries reach legal age. Trustees have a fiduciary duty to act in the best interests of the beneficiaries which requires access to certain financial documents, such as retirement account details and life insurance policies. A trustee will also need to review the trust document which should entail the trust’s location, beneficiaries, and specific instructions for the trustee to follow.
The instructions outlined in the trust document, as well as Arizona state laws, dictate how long a trustee has to distribute assets to beneficiaries. Each situation is different and some estates may be more complex than others, such as estates where real estate and other assets were bought or sold before distribution to the beneficiaries. However, the average trust should be fully distributed within 12 to 18 months once the trust administration has begun.
The Job of a Trustee
Being a trustee requires extensive organization to ensure that the trust is managed properly and that any investments made on behalf of the beneficiaries are sound. As a trustee, you are in charge of obtaining a death certificate, locating and filing the will with the local probate court, notifying the state Department of Health and the Social Security Administration of the death, getting assets appraised, paying debts, and transferring property into your name as trustee.
Next, a trustee will need to get in touch with the beneficiaries named on the trust. Beneficiaries are generally considered current or contingent. Current beneficiaries are those who are first in line to inherit assets from a trust. Contingent beneficiaries are next in line if the current beneficiaries should die before the trust becomes irrevocable. While many trustors set an age for assets in the trust to be distributed, such as age 18 or 21, a trust offers maximum flexibility which allows for assets to be transferred at any age or for the beneficiary’s lifetime.
Settling an Estate
To determine how long a trust remains open after the death of the trustor, you need to consider the type of trust.
- Revocable Trust – A revocable trust remains in effect while the trustor is alive. During this time, the trustor has the right to make changes to the trust or even close the trust at his or her discretion. Once the trustor dies, the trust becomes an irrevocable trust.
- Irrevocable Trust – The terms of an irrevocable trust cannot be modified or amended without the direct permission of the beneficiaries. Irrevocable trusts offer certain benefits, such as asset protection from lawsuits and creditors.
During the trust administration process, there are three main parties involved – the trustor, the trustee, and the beneficiary. The trust administration process begins when the trustor dies and all bank accounts and other assets are secured. The trustee will also pay any due debts or taxes before distribution.
Most trusts can be distributed to beneficiaries in as little as one year and rarely will a trustee need to extend this timeframe to more than two years.
In some instances, a beneficiary may be able to acquire a preliminary distribution. This is a distribution that is delivered early on if the amount in the trust is sufficient. For example, if the trust has one million dollars and the expenses are calculated to be less than 50 thousand, the trustee can make a preliminary distribution based on what is left over. A preliminary distribution can often be obtained within a few months of the death.
Unless the trust explicitly outlines a timeline in which the trust should be settled following the trustor’s death, there is no established timeline in which assets should be distributed to beneficiaries. The type of asset will influence the length of time it takes to transfer. For example, liquid assets like bank accounts, stocks, and mutual funds can usually be transferred in just a few weeks or months. However, illiquid assets like real estate can take more than a year.
Speak with an Attorney
As a beneficiary, you have certain rights designed to help protect your inheritance and ensure that you receive the assets you are entitled to within a reasonable amount of time. If you are concerned about how a trust in which you are the beneficiary is being handled, an experienced probate attorney can provide legal guidance.
A probate attorney can assist with a wide range of actions, such as probating the estate, settling a trust, contesting the legality of a trust or will, and contesting the actions of a trustee or executor. You can also trust a probate attorney to answer any questions you may have about the trustee’s actions or about your rights as a beneficiary.
To learn more about the timeline involved in the distribution of a trust to beneficiaries or to consult with a reputable probate attorney, contact JacksonWhite Law.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.