A trustee can dispense trust property at any time as long as the disbursement is consistent with the terms of the trust, an applicable statute, or a court order. Most trusts give trustees broad discretion on making trust disbursements. The trust document also might provide specific instructions for how to make trust disbursements; however, most trusts are silent on this. Trustees should follow a few basic steps when dispensing of trust property.
Dispensing Trust Property
Review the trust document for any specific provisions regarding how or when trust property can be disbursed.
Follow any specific instructions regarding how to carry out trust disbursements.
Transfer property possession. If the trust document is silent on how to dispense trust property, you can simply transfer physical possession of the property to the beneficiary.
Execute documents. If you are dispensing trust property that requires a certificate of title, such as real estate or stock certificates, you need to execute documents of conveyance to the beneficiary. For example, if you are dispensing real estate you need to execute a property deed to the beneficiary.
Record deeds. If you are dispensing real estate you need to record the conveyance deed with the county recorder where the property is.
Remove property from the trust schedule. If you are dispensing property that does not require a certificate of title, then you should remove the property from the trust schedule. The easiest way to do this is to draft a new schedule that does not include the dispensed property.
- Trustees owe fiduciary duties to all of the trust beneficiaries. This means the trustee must exercise reasonable and prudent care and control over all trust property. If you dispense trust property in violation of the terms of the trust document, then you may be in breach of your fiduciary duties and you could be liable for damages to one or more of the beneficiaries. Only dispense trust property if you are certain you have legal authority to do so.
- Read the trust document carefully and if it has any instructions on making trust disbursements, then you need to follow those instructions thoroughly. Additionally, if you are dispensing of trust property pursuant to a state statute or a court order, you need to be careful to precisely follow the statute or the court order. If you have any questions, then you should consult an attorney or possibly even ask for guidance from a judge in a formal court proceeding.
- Nolo's "Make Your Own Living Trust;" Dennis Clifford; 2009
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