When Do Beneficiaries Receive Money From a Trust?

ANSWER: THE TRUST IS AN ENTITY; THE TRUSTEE OF THE TRUST IS IN CHARGE, AND THEY MAKE THE DECISIONS REGARDING DISTRIBUTIONS AND DETERMINE WHEN DISTRIBUTIONS ARE MADE, AND THE AMOUNT OF THOSE DISTRIBUTIONS TO BENEFICIARIES

A trust is an entity similar to a partnership or corporation but it has a trustee (not a partner or president) to hold assets and make a trust distribution or distributions to beneficiaries (not partners or shareholders) either based on dates in the trust or when determined by the trustee. As the trust can be many pages long, it is very important to get a copy, read it carefully and talk to the trustee about any question. If you just become aware of the trust it is probably because the trustee sends you a Cal Prob Code § 16061.7 Notice. If the trustee does not send you either a Cal Prob Code § 16061.7 Notice (when certain events occur, for instance a death, incapacity, or change in trustees) or provide you with a copy of the trust, then you should call the trustee and ask for both that notice and a copy of the trust. Then it is important to meet with the trustee to obtain a list of the assets in the trust based on their fair market values, less loans against the trust assets on the date of the passing of the decedent or on the formation of the trust if it was created during the life of a person such as a parent or a grandparent.



Since the trust represents a gift of money or property that you did not have, it is recommended that you are polite and retain a trust expert witness if you have any questions after the meeting with the trustee. And a politely handled trustee is less likely to have significant expenses with attorneys and accountants to take a lot of time to go over everything, including more formal procedures, with the trustee before distribution to the beneficiaries. Any legal and accounting expenses from attorneys and accountants are charged to the trust leaving less for the beneficiaries. As you will see in the FAQs, that does not mean the trustee has carte blanche to do whatever the trustee wants without responsibility to the beneficiaries.

SOURCES:
Cal Prob Code § 16081 - When a trust instrument confers “absolute,” “sole,” or “uncontrolled” discretion on a trustee, the trustee must act in accordance with fiduciary principles. The trustee has significant authority to determine the timing and amount of distributions, but this authority is not without limits.

Trolan v. Trolan, 31 Cal. App. 5th 939 (2019) – A trustee must exercise discretionary powers reasonably unless the trust instrument provides otherwise.

Cal Prob Code § 16081 - If a trustee is also a beneficiary and has discretion to make distributions for their own benefit, such discretion is limited to distributions for their health, education, support, or maintenance unless the trust instrument explicitly provides for broader powers under this code section.

Cal Prob Code § 16000 - Establishes that the trustee has a duty to administer the trust in accordance with the trust instrument.

Hearst v. Ganzi, 145 Cal. App. 4th 1195 (2006) - Trustees owe a duty to all beneficiaries and must act impartially unless the trust instrument provides otherwise.

Penny v. Wilson, 123 Cal. App. 4th 596 (2004) – Construes Cal Prob Code § 16081, that even when a trustee has sole and absolute discretion, they must act in good faith and in accordance with fiduciary principles.

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READ THIS RELATED ARTICLE: How does a trustee equalize trust distributions and tax liability among beneficiaries?