08 Mar How are Trust Assets Distributed to Beneficiaries?

You can control how trust assets are distributed to your beneficiaries. Choosing the right trust distribution method will help protect your estate. It can be a complicated matter that’s best sorted out with the advice of an experienced lawyer. 

An estate planning attorney can help you develop the best strategies for protecting your legacy. Here at Phelps LaClair in Arizona, estate planning is what we do. Our focus allows us to design and implement strategies that work for your estate. 

Staggered Trust Distributions

This trust distribution method is used by grantors who want to space out distribution of assets over an appropriate time frame. What that means will differ for each person and their estate plan. Some may want to distribute trust fund assets on a regular basis. 

For example: Martha wants to give her son $8,000 every month. However, Charles wants to give his grandchildren assets on special occasions like graduations, weddings, or holidays. Although they chose different manners of trust distribution, both are staggering the release of assets. 

Discretionary Trust Distributions

When choosing the discretionary trust distribution method, it’s up to the trustee to pick and choose when assets are received. The trustee may be appointed by the grantor (the creator of the trust) to manage the trust distributions. It’s possible to manage your own trust and be both grantor and trustee. Your spouse can also have the same titles. However, you should have a successor trustee to take on the responsibility of the trust after you pass on. 

An example of distributing trust funds using the discretionary method: John has a young trust fund beneficiary who doesn’t know how to manage money yet. In order to protect his legacy, and continue providing the best for his beneficiary, John names himself the trustee. He chooses exactly when and how much will be distributed from the trust.  

What if you’re not the trustee? Choose someone you rely on, like your lawyer. The trustee has fiduciary responsibilities to act in the best interests of the trust. Following all laws, the trustee cannot do anything against a grantor’s instructions. 

Outright Trust Distribution Method

Beneficiaries can receive funds or assets from a trust without any restrictions as an outright gift. This would be an outright trust distribution method. It may work well for some estates. 

For example, if Harriet has a relatively straightforward estate and wants her children to receive liquid assets, she could choose this trust distribution method. Any of her non-liquid assets, like a house or yacht, could be sold. The cash from the sale would be given by the trustee to Harriet’s children. 

Ben has a complicated estate and doesn’t want his beneficiaries to blow through their inheritance. He’s worried about the estate funds being compromised by divorce, bad wealth management, or beneficiaries that tend to overspend. Because of these reasons, Ben decides that an outright trust distribution method is not great for his estate. 

Plan with Experts

Starting the process of estate planning early is crucial. At Phelps LaClair we’re experienced in using advanced trust and gifting strategies that are designed to eliminate your death taxes. In order to take full advantage, you must start planning early! Our law firm serves Scottsdale, Glendale, Phoenix, Mesa, Chandler, and the surrounding areas. 

Write down your questions and schedule an appointment for your free consultation.

photo by Ian MacKenzie | used under the creative commons license, no edits made | 3/4/2021 from Flickr