How to Distribute the Remainder of a Trust at the Death of the Income Beneficiary

By Jennifer Williams

When an individual wants to maintain his property without retaining legal ownership of it, he may create a trust and transfer ownership of his property into it. He then names a beneficiary to receive income generated by the property placed in the trust, such as rents generated from rental property or dividends from stock. Transferring property into a trust removes it from the estate of the trust creator, or settlor, thus keeping it from getting tied up in probate upon the settlor's death. When the beneficiary dies, the trust property must be distributed according to the terms of the trust.

When an individual wants to maintain his property without retaining legal ownership of it, he may create a trust and transfer ownership of his property into it. He then names a beneficiary to receive income generated by the property placed in the trust, such as rents generated from rental property or dividends from stock. Transferring property into a trust removes it from the estate of the trust creator, or settlor, thus keeping it from getting tied up in probate upon the settlor's death. When the beneficiary dies, the trust property must be distributed according to the terms of the trust.

Step 1

Identify the individual named as trustee in the trust document. If you are not the trustee, meaning the individual in charge of executing the terms of the trust, you must go through the named individual or organization to distribute the remaining property in the trust. Alternatively, you may petition the court to be allowed to replace this individual to facilitate distribution yourself if you can show that the named trustee is not performing his duties to the best interests of the beneficiaries.

File a DBA for your business online. Get Started Now

Step 2

Read the trust document for instructions. The terms of the trust will describe how the property remaining in the trust is to be distributed upon the death of the income beneficiary. Trust documents customarily provide these instructions and these instructions must be followed exactly.

Step 3

Identify whether there are any contingent beneficiaries named in the trust document. If there are, determine whether the contingent beneficiaries are to begin receiving income generated by the property in the trust or receive the property itself. If there are no contingent beneficiaries, determine whether the trust document intends the property to revert to the settlor's estate for distribution to his heirs.

Step 4

Notify any contingent beneficiaries of the income beneficiary's death. Inform them of the requirements set out in the trust document for either continuation of the trust or distribution of remaining trust property. If there are no contingent beneficiaries, notify the settlor's heirs of the income beneficiary's death and need to distribute the remaining trust property.

Step 5

Petition the appropriate state court, probate division, in the county where the trust was created regarding any questions you may have concerning the terms of the trust. The court will interpret any unclear language and provide instructions for how to lawfully distribute the remaining trust property.

Step 6

Follow the terms of the trust when distributing the remaining property or transferring the right to receive trust income to any contingent beneficiaries. In the case of court interpretation, execute the court's instructions exactly.

File a DBA for your business online. Get Started Now
Does a Beneficiary of a Living Trust Have the Right to See the Trust?

References

Related articles

How to Settle a Trust in Indiana

Keeping assets well away from probate court is the main idea of trusts. These legal structures allow a settlor to place investments and property under the management of a trustee. A trust also names beneficiaries who receive assets -- without the assistance of the court system -- when the settlor dies. This event begins settlement of the trust, which is the responsibility of the trustee.

Changing a Family Trust Deed

A family member may have placed his property into a family trust as part of his estate planning process. Under the advice of his accountant, attorney or other professional or for a myriad of other reasons, he may have decided to remove the property from the trust or place the property, or a portion thereof, into a different trust.

What Is a Non Testamentary Trust?

A trust is a legal document that allows a trustee to hold property for the benefit of others, known as beneficiaries. Trusts are created when a grantor or settlor asks the trustee, which can be a company or a person, to hold and distribute money or property to beneficiaries. The grantor names beneficiaries in the trust documents, and the money and property in the trust will be distributed based on the grantor’s instructions. For example, a grantor can designate that no money is to be distributed to beneficiaries unless it relates to their health, education or welfare. Trusts typically fall into one of two large categories: testamentary and non-testamentary trusts.

Related articles

Can a Sole Beneficiary Refuse His or Her Trust?

Turning down a significant gift may seem like a senseless decision. In reality, however, people say "no thank ...

What Is a Trustee Appointed For?

The creation of a trust allows a grantor to place assets under the care of a trustee, who then administers these assets ...

Oregon State Living Trust Rules

Oregon, like many other states, has adopted the Uniform Trust Code, which sets forth the rules and requirements for ...

Revocable Trusts & Divorce

Revocable trusts are arrangements in which the maker of the trust, called the settlor, transfers property to another ...

Browse by category