When Your Property Is Distributed
Your trust document can instruct your successor trustee to distribute your property immediately after your death or to make delayed distributions. As you continue to read this chapter, you will probably develop both a short-term and long-term plan for your beneficiaries.
If all of your property is in your trust, you need to give your successor trustee the power to make current distributions after you are gone. Even if you don't want to do this, state law will force your successor trustee to use your trust property to pay your outstanding unpaid bills, debts, and taxes if you had the power to alter, amend, or revoke your trust document while you were living, which is common for most people if they want to maintain control of their property.
In addition to giving your successor trustee the power to pay your bills, debts, and taxes, you typically want to give her the power to make current distributions of cash or property because your beneficiaries will need money within a short period of time after you are gone. How much beneficiaries will need is different for all families.
Alternatively, you may simply want all of your property distributed as soon as possible after your death. If this is your plan, you will instruct your successor trustee to distribute your property to your named beneficiaries as soon as the trustee provides for the payment of your outstanding bills and taxes.
One of the primary reasons people create trusts is to delay distributions to their beneficiaries. There are some limits on how long you can delay the distributions from your trust, and all states have different laws regarding this length of time. For instance, some states won't allow you to postpone the final distribution from your trust longer than twenty-one years after a “life in being.” This is the classic rule against perpetuities. In the states following the classic rule against perpetuities, if you had a great-grandchild who is living and the beneficiary of your trust, all the trust property must be distributed within twenty-one years after the death of the great-grandchild.
The rule against perpetuities is so complex that many states changed to a rule that says your trust property must be distributed within a specific number of years after your death. If you are looking to extend your trust for any length of time, check with your state law to see what its time limits may be.
It is very typical to delay trust distributions until a beneficiary has reached a particular age. Unless you are trying to delay distributions for multiple generations, there are very few limits on how you can structure the distributions of your trust property. Some people think that a beneficiary should not receive property until he is twenty-five years old; others feel thirty is the magic age; and still others want to make sure their beneficiaries plan for their retirement and, therefore, distributions to the beneficiaries are restricted until they reach the age of fifty-five or sixty!