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Trust Litigation — The Importance of Timely Distributions

On Behalf of | Jul 31, 2015 | Trust Disputes

This Blog article continues the discussion of “Causes of Trust Disputes and Litigation” from last week’s article.  As discussed, the usual purpose of a trust is to act as a flexible and efficient means of transferring assets from the decedent(s) to the beneficiaries, and to avoid probate.  By avoiding probate the estate can avoid the delay and expense of having the probate court supervise the distribution of the estate.  While avoiding the involvement of the probate court is usually a good thing, sometimes there are problems leading to trust disputes.

There are many causes of trust disputes.  One of the more common trust dispute issues that Buffington Law Firm’s trust litigation attorneys have dealt with involves delayed distributions.  Most trust instruments provide that the successor-trustee will make the distributions to the beneficiaries as promptly as efficiency and estate tax considerations allow.  Naturally, every estate is different, and sometimes there are good and sound reasons why a successor-trustee may delay making distributions.  In some situations, for example, the assets may include a working business.  Figuring out how to distribute or liquidate assets of this type may take time.

 Unfortunately, we have seen many frankly bad reasons why trustees delay making the distributions and winding up the trust fully and finally.  One of the most common reasons for delayed distributions is a sentimental attachment to real estate.  Sometimes the main asset in an estate is a very valuable home, especially here in California where real estate appreciation is the rule rather than the exception.  Sometimes there is a reluctance to sell “mom and dad’s home” and trustees will delay for all sorts of reasons.  This usually means that one or usually all of the beneficiaries simply do not get the benefit of the inheritance to which they are entitled under the terms of the trust.  Owning an undivided interest in a home through a trust provides infinitely less flexibility than an inheritance of cold hard cash.  Usually one or more of the beneficiaries quickly realizes this and disputes arise as to the disposition of the real estate.  Trustees sometimes act arbitrarily and illogically in these situations, refusing to sell the home for reasons of sentiment, even when the situation calls for hard-headed business decisions to give the beneficiaries what they are entitled to.

In these situations most times we recommend that the successor-trustee put considerations of sentiment aside, list the property with a reputable real estate broker, sell it for market value and distribute the proceeds to the beneficiaries in accordance with the terms of the Trust.  As timely as possible and be done with it.  Sentiment is a fine thing, but delay simply exacerbates family conflict.

The above may seem obvious, but Buffington Law Firm’s trust attorneys have seen many situations in which successor-trustees delayed for years in distributing assets.  Sentiment can be one reason; other times trustees simply want to keep the trust alive because they like the perceived power of being the trustee.  These situations sometimes require legal intervention by a skilled trust litigation attorney.

If you are involved in a trust dispute situation, we invite you to discuss the matter in a free legal consultaion directly with an experienced trust litigation attorney.  As always, there is no obligation and we will explain your rights to you, and the legal means to achieve them.