Failure To Properly Terminate A Trust And Distribute The Assets
[raw]All trusts have an end date – known as the “termination” date. At the point that a trust terminates, the assets remaining in the trust are required to be distributed to one or more of the beneficiaries. For instance, a trust may terminate upon the death of the primary beneficiary of the trust, or a trust may terminate upon a specific date (for example, the beneficiary’s 25th birthday).
Whenever the trust terminates, the trustee has a duty to distribute the assets within a reasonable period of time after the termination. Generally speaking, the distribution of the assets should occur within 9 months or so of the termination, unless circumstances exist that justify a later distribution.
In some instances, a trustee may fail to properly wind up the trust and distribute the assets within a reasonable period of time. For instance, the attorneys at Ford + Bergner have seen cases where the trustee failed to distribute the assets for 13 years after the trust terminated. Any time that a trustee is required to wind up and distribute a trust, he should consult with competent attorneys to confirm that he is winding the trust up correctly. Conversely, any time that a beneficiary is faced with a trustee who is not winding up a trust fast enough, the beneficiary should seek advice from attorneys who routinely handle trust litigation. In many unfortunate cases, the trustee’s failure to properly distribute the assets can reflect the fact that the trustee has improperly used the assets for his/her own benefit or that the trustee does not know how to properly fulfill their duties.