You are here

Can I as trustee distribute some trust assets to ultimate beneficiaries prior to completion of estate probate?

I and a close friend are co-trustees of an irrevocable trust set up by my mom's husband (my stepfather) who predeceased her by 20 yrs. My mother, who died this spring, was the income beneficiary and had the use of the home and whatever income she needed from the financial investments. The ultimate beneficiaries are his three children, now in their 60s and 70s and living out of state. My mom drew modestly for her living expenses, and the value of the trust increased over the years. The trust now holds a house valued at about $400k and $ being managed by a professional financial person of about $700K. There are no other assets.

The trust allows wide latitude for whatever decisions the trustees deem best, including transfer and sale of real estate. Had my mother lived longer, the trust would have allowed sale of the house and/or complete spending of all the financial investments to fund her care. As soon as my mom passed, I tried to do everything I could to expedite the closing of the trust and transfer of assets to heirs. This included immediate notification to the heirs of her passing, and the amount the invested funds were worth at that date, and meeting within 2 weeks with an estate attorney.

The estate attorney, whom I had no prior connection with, was recommended by the financial planner, whom I trusted and had been responsible and responsive to my mom over the years. The estate attorney seemed experienced and talked like he could handle everything smoothly so I signed a contract (hourly rate basis) and paid him a retainer from the trust funds. Unfortunately since then (three full months) attorney seems to have had many other commitments like trials and an unexpected surgery and it seems like not a lot, if anything, has been done on the trust estate settlement.

Though I've asked repeatedly and in many different ways, I've gotten no response to "What has been done?" For just one example, a month and a half ago he said he had contacted an appraiser to appraise house, and that she would contact me directly for access. When I got no contact for 2 weeks and asked him why, he said she was on vacation. A month later I still have no contact, and no answer to my messages/emails re this.

Meanwhile one of the heirs who is a bit pushy by nature, and frustrated with (lack of) progress, engaged an atty on behalf of the siblings (whom the attorney I hired has acknowledged by letter but not spoken with), sent his own appraiser to the house, emailed me he'd like to plan a "yard sale" of house contents....

At this point, I just want to minimize and/or finish up my role as trustee. I really don't want to be responsible for the upkeep of a vacant house, or finding/overseeing suitable tenants. I or the co-trustee have never charged any trustee fees, I didn't benefit from handling my mom's affairs prior to her death, (other than mental satisfaction of trying to do the best for her) and I consider that my step siblings were always gracious during the long period my mom outlived their dad. I feel they deserve timely access to the estate assets now that there is no need to be prudent re anticipated "worst case" mom care needs.

My question is can I sign over the house deed (it's in the name of the trust) to the heirs now, and/or a considerable portion of the financial investments before probate is finished? My mom had no unpaid bills. I guess my secondary question would be - how much updating should I reasonably expect from attorney re steps taken re estate settlement - and if I don't get any satisfaction, what do I do then?

Share this with your friends

Submitted Mon, 08/01/2011 - 12:10

It is so unfortunate that you have to deal with not only losing your mother, but this kind of thing. I am sorry about both your mother, and your aggravation with the process.
First, you must recognize that it does take some time to properly wrap-up the administration of the trust. You, as a trustee, have an extremely high fiduciary obligation to all the beneficiaries and personal liability for certain mis-steps. Part of the attorney's job is to make sure that you are protected.
So things like a final income tax return can seem simple enough, but what happens if any of the open years are audited and some additional tax is due? What does the trust document require in terms of a final accounting - and has that already been addressed. So it is never an overnight type thing.
Also, the trust administration is not really (typically anyway) tied into the probate process. The trust is an autonomous entity that exists and functions outside the probate process. I may not fully understand your situation, but generally you administer the trust without regard reference to what is going on with your mother's probate estate.
So now to what I think are your two core issues. First, the question of interim distributions. I am dealing with a situation right now where the trustee felt compelled to make distributions because the beneficiaries were making his life difficult and he “just did not want to deal with them anymore”. So he capitulated and made a sizable distribution. A month later the IRS contacted him and made a significant revision to the estate tax return, resulting in a six figure tax and penalty - which he had to pay out of his own funds (the beneficiaries had all spent their distributions). That is a very bad example of what can happen. It is generally the "unknowns" that will trip you up - and that is why you hired an attorney in the first place. Quite often an interim distribution is appropriate (may be even required), but you need to make sure that it is safe and proper before you act – and NOT because you are under pressure from the beneficiaries.
So that brings us to your relationship with your attorney. As a practicing attorney I will tell you that we all try to keep our workloads at the “right” level - but that is easier said than done: too busy and clients and staff get frustrated; not busy enough and it is hard to pay the bills! Sometimes it is hard to balance everything that needs to get done, but I would try to NOT take it personally. Try to express your frustration with your attorney. If there is not an appropriate and timely response, then I would consider finding another attorney. As in all relationships, there has to be effective communication - and if that is lacking, then you will continue to be frustrated. As much as I feel that your schedule might be a little aggressive, I think that the there has to be open and clear communication channels. He works for you, and if he is not acting as such, then you can find another attorney. There are a lot of attorneys who specialize in these issues - so I know that you will be able to find a suitable replacement.
Good luck. Attorney Peter

Talk to an Estate Planning Lawyer Today
Most offer FREE Consultations
Connect with The Forum
facebook google twitter linkedin