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.

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.

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.

File a DBA for your business online. Get Started Now

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
Tax Treatment of Living Trust Distributions
 

References

Related articles

How to Terminate an Irrevocable Trust

With a trust, you transfer assets to a legal entity set up to shelter your estate from the probate process. A trust allows you to control who will inherit your property after your death and give instructions to a trustee on how to manage that property. Although an irrevocable trust, in theory, cannot be changed or cancelled, there are ways to close down the trust and, if you wish, transfer assets to a new one. If the trust no longer serves the purpose for which it was set up, you may revoke it or draw up amendments that substantially change its terms. In most cases, this process will be subject to review by the courts to ensure that the beneficiaries retain the rights they were granted in the original trust.

How to Create a Revocable Trust

A revocable living trust allows you to provide for the distribution of your property after your death. When you set up a trust, you help your heirs and family avoid the probate courts, which must review and authorize any will. “Revocable” means that you can change the trust at any time, or cancel it altogether. Creating a trust is a straightforward matter of preparing and signing a document, which contains certain provisions and conforms to the law.

Can the Executor of a Will Spend the Money Any Way He Wants?

When someone dies and leaves a will, the will instructs how the deceased's property should be distributed. Likely, it will name the individual responsible for managing the estate, the estate’s personal representative, or executor. The executor has a duty to prudently manage the estate so that debts are paid and each beneficiary receives his due distribution.

DBAs DBAs

Related articles

Does a Beneficiary of a Living Trust Have the Right to See the Trust?

All trusts, including living trusts, are established to benefit certain individuals or organizations identified in the ...

How to Sign Documents As a Successor Trustee of a Living Trust

A living trust is a common document in estate planning that provides for an orderly transfer of property without having ...

How to Dissolve Inheritance Trust

An inheritance trust, usually called a testamentary trust, is a trust that is created by language contained in the last ...

How to Obtain a Copy of a Living Trust in California

A living trust is a means of transferring property to an individual or group of people. It is created by a person ...

Browse by category
Ready to Begin? GET STARTED