When a loved one passes, that time can be filled with many emotions. The process of sorting through their belongings can bring up memories and moments that cause joy and sadness. If you are the trustee of that loved one’s estate, this can add another difficult layer. You are now responsible for going through their finances, deeds, paying off debts, paying taxes, settling bank accounts, administering their will and living trust, and much more. All these legal responsibilities are to ensure their wishes are carried out correctly.
This process is not quick, but exactly how long it takes is determined by several factors, including the type of trust. Understanding the trust process can help in identifying trust administration timelines.
The Importance of Timeliness
Trust distributions must be done within a reasonable amount of time. Unfortunately, “reasonable” is a subjective measurement that is often left to be defined by the trustee. Once the trustee takes charge of the trust, the administration process begins. Assuming there are no problems such as lawsuits or inheritance disputes, the distribution should be completed within twelve to eighteen months.
To ensure this process is completed on time, trustees can make preliminary distributions prior to the final one. For example, if the trust holds $1 million, they could distribute $750,000 while keeping the remaining amount in reserve. Trusts do not have to be an all-or-nothing distribution. There are ways to implement partial distributions.
Extending Trust Administration
When the administration process takes longer than two years, there are often very specific parameters that cause it to happen. For example, the IRS requires trustees to file estate taxes, which could delay the process. However, the estate tax exemption is $11.4 million, so the likelihood that this is the cause of the delay is minimal.
If, however, there is a lawsuit filed against the trust, this could delay the process as well. As soon as the validity of the trust is challenged, an amendment is proposed, or any other legal issue with the trust is filed in a motion, the distribution of the trust cannot be made until all claims are settled.
Beyond these circumstances, or other reasonable exceptions, the trust should be distributed within a plausible timeframe. Unfortunately, there are instances where trustees delay the process because they are not sure what to do or simply choose to. If the distribution exceeds eighteen months without cause, there is validity in considering the timeline to be unreasonable.
Timelines Are Variable
California does not have any established laws that define the timeline of the trust. Because of this, the administrative decisions fall solely on the shoulders of the trustee. The only definitive time is what is considered reasonable.
However, if the trust itself is structured to stagger the distribution of assets, then that becomes the definitive amount of time that must be met by the trustee. Structures often involve:
- Milestone dates that could be birthdays or anniversaries
- When the trust designates a certain age that beneficiaries must reach
- Milestone events such as a graduation or wedding
- A specific family event such as the birth of a grandchild or great-grandchild
- Any other terms that are set in the establishment of the trust
What Can You Do?
Sometimes, a trustee is obligated to uphold the timeline of the trust but fails to begin distribution in accordance with that timeline or within a reasonable time. Other times, a trustee fails to distribute assets in the way that they were established. If any of this occurs, there are legal ramifications such as:
- Filing a claim against the trustee, citing a breach of fiduciary duty.
- Involving the probate court to order the distribution.
- Seeking the replacement or suspension of a trustee.
In addition, beneficiaries have a right to dispute the terms of a trust if:
- The legal formalities required in a trust are absent.
- There was a lack of mental capacity to make changes to the trust within the trustor.
- There was fraud involved in the changes or the establishment of the trust.
- The changes or the trust were established because of coercion.
Q: How Long Does It Take to Administer a Trust in California?
A: California only dictates that the distribution of a trust be completed within a reasonable amount of time. However, this is a subjective measurement that could turn into years of waiting. However, there should not be any reason why a trust cannot be distributed within twelve to eighteen months. It could be as little as four if it is a cash-only trust.
Q: How Long Does an Executor of a Trust Have to Settle an Estate in California?
A: The laws in California do not have an established timeline for the execution of an estate. The law only requires “reasonable” timeframes. This timeline can be short or long depending on the size of the estate, any legal claims filed against the estate, or the sense of urgency felt by the trustee over the estate.
Q: How Long Does It Take to Receive Inheritance From a Will in California?
A: The execution of a will can take six months to a year in most cases. The average time is nine months. However, complications could extend this beyond two years. This can be particularly lengthy if there is trouble locating the will after death or if there are complications with the execution of the will.
Q: What Is the 65-Day Rule for Trusts?
A: This rule specifically applies to how the IRS views the receipt of trust distributions. It states that any distribution received within the first 65 days of the tax year can be counted as part of the previous year’s income tax. Generally, the IRS uses March 6 as the cutoff date for the 65-day rule.
Trust and Estate Attorneys
Whether you have been designated as the trustee of someone’s estate or are the beneficiary of one, there may be many questions regarding its distribution. The loss of a loved one can be difficult, but that difficulty should not be made worse by trust or estate problems. If you have questions, The Flanigan Law Group can provide answers. Call us today and let our team of Orange County Trust Administration Lawyers help you.