Can an Executor of an Estate Distribute Gifts From a Trust?

By Beverly Bird

An executor is to a trustee what a cat is to a dog -- they’re both animals but different species. Executors and trustees are both fiduciaries, but they’re different kinds of fiduciaries. One works under the direction of the court to settle your probate estate while the other deals with assets you’ve placed in trust. Your executor cannot distribute gifts from your trust unless you named her as both the trustee of your trust and your estate’s administrator.

Pour-Over Wills

The executor you name in your will only handles your probate estate, which includes assets that you did not transfer into your trust. When you created your living trust, you funded it by retitling certain items of property into its name. If the trust is irrevocable, you appointed someone else as trustee and immediately stepped aside to allow him to run it. If the trust is revocable, you’ve probably acted as trustee yourself, managing the assets during your lifetime. You most likely appointed a successor trustee to take over for you at your death or if you become incapacitated. If you drafted a will as part of your estate plan as well, it may be a “pour-over” will, designed to catch any property that you neglected to move into your trust before your death. This type of will requires that your executor move these overlooked assets -- your probate estate – into your trust when you die. After they’re transferred, your successor trustee will deal with them according to your trust’s terms, making gifts to your beneficiaries if this is what you instructed.

Testamentary Trusts

Another reason you might have both a trust and a will is that your trust is not living, but instead testamentary. This means that when you wrote your will, you instructed in it that the executor should create the trust after your death and move your probate estate into it. You might do this because you don’t want your beneficiaries to receive everything in a windfall -- they may be spendthrifts or too young to handle the responsibility. A testamentary trust can hold onto their inheritances for them until a time you specify in your will. You might name the same individual as executor of your will and trustee of your testamentary trust, in which case she would manage the trust assets and distribute them to beneficiaries as you directed. If you named two separate people, the trustee would take over after your executor forms the trust and moves your assets into it.

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Trustee vs. Executor

If you did not leave a trust, your executor would be responsible for gathering your property, paying your debts and taxes, then distributing your assets to the beneficiaries you named in your will. Your successor trustee does the same thing with the property you placed in trust. Your executor must abide by the wishes you stated in your will, and your trustee must follow the directions you incorporated in your trust documents. Your probate estate must be distributed to beneficiaries before probate can close, at which time your executor is out of a job, but your trust can last as long as you designed it to. Your trustee has no control over your probate assets, and your executor has no control over your trust property.

Naming the Same Individual

There are pros and cons to naming the same person to both roles. You might want to discuss your personal concerns with an estate-planning professional, but the choice is ultimately yours. If you select two different people and they don’t get along, the period of time while your estate is in probate could become contentious, and this can slow probate down. Naming the same person often streamlines the process, but you effectively give this person control over your entire estate plan.

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What Is the Difference Between a Living Trust and an Estate Account?
 

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