How Long Can a Trustee Hold Assets Before Distributing Them?

A California trustee is expected to administer and distribute trust assets within a reasonable time under the circumstances. There is not one universal deadline that applies to every trust. Some distributions may be made relatively quickly, while others may need to wait until taxes, creditor matters, accountings, property sales, or legal disputes have been resolved.

A trustee should not unnecessarily delay an inheritance, but the trustee also should not rush to distribute assets when doing so could expose the trust or its beneficiaries to avoidable financial or legal risks.

What Is a Reasonable Amount of Time for a Trustee to Distribute Assets?

What constitutes a reasonable period depends on the trust and the issues that must be resolved before the administration can safely be completed.

A straightforward trust holding liquid assets may be easier to administer than one involving real estate, businesses, complicated investments, tax issues, creditor claims, or disagreements among beneficiaries.

The firm's successor trustee FAQs provide additional information about what may be involved in settling a living trust after death.

Why Might a Trustee Delay a Distribution?

There are legitimate reasons why a trustee may need to continue holding some or all of the trust assets.

Examples can include:

• Resolving taxes or determining potential tax obligations
• Completing required accounting work
• Addressing valid creditor claims
• Selling real estate or other property
• Resolving litigation or beneficiary disputes
• Determining appropriate reserves for remaining expenses
• Protecting the trust from liabilities that have not yet been resolved

Making distributions too early can sometimes leave the trust without sufficient assets to satisfy obligations that arise later.

Can a Trustee Make Partial Distributions?

Depending on the circumstances and terms of the trust, some assets may be capable of being distributed before the entire administration is finished.

However, a trustee must make prudent decisions. A desire by beneficiaries to receive their inheritance quickly does not eliminate the trustee's responsibility to protect the trust and complete required administration tasks.

Can a Trustee Hold Assets Because of Taxes?

Yes. Tax matters can be a legitimate reason for delaying a final distribution.

If unresolved tax obligations remain, distributing all trust property prematurely could leave insufficient assets available to pay amounts that later become due.

A trustee may therefore need to retain an appropriate reserve or wait until relevant tax matters have been addressed.

Can a Trustee Wait Until Real Estate Is Sold?

Real estate can extend the administration timeline. The trustee may need to secure and maintain the property, determine its value, decide whether a sale is appropriate, complete the sale process, and address expenses associated with the property.

These responsibilities can make a trust involving real estate take longer to administer than one consisting primarily of cash or readily transferable financial accounts.

What If the Trustee Is Delaying Distributions Without a Good Reason?

Although trustees should not rush, they also cannot simply hold assets indefinitely without a legitimate reason.

A trustee who causes unnecessary delays may potentially expose himself or herself to legal liability, particularly when the trustee has failed to communicate adequately with beneficiaries about what is happening and why.

For additional information, review the firm's discussion of when a California trustee may delay distributions.

Why Should the Trustee Keep Beneficiaries Informed?

Communication can be particularly important when an administration takes longer than beneficiaries expected.

Beneficiaries may become suspicious when months pass without a distribution and they receive little explanation. A trustee who communicates about unresolved taxes, property sales, creditor issues, or other legitimate obstacles can reduce misunderstandings and potential disputes.

California beneficiaries also have certain rights to information about trust administration. Understanding trust accounting and beneficiary rights can help both trustees and beneficiaries know what to expect.

A Trustee Must Balance Speed With Prudence

The goal of trust administration is not simply to distribute assets as quickly as possible. The trustee must settle the trust responsibly, address outstanding obligations, protect the assets, comply with the trust's instructions, and then make appropriate distributions to the beneficiaries.

At the same time, unnecessary delay can create its own problems. The trustee should be able to explain why assets remain in the trust and what still needs to occur before the administration can be completed.

Get Help Completing a California Trust Administration

If you are serving as a successor trustee, Kavesh, Minor & Otis helps trustees navigate California trust and estate administration, including asset management, beneficiary communication, taxes, debts, and distributions.

You can also download the firm's free report on the 10 biggest mistakes trustees make to understand common problems that can expose trustees and beneficiaries to unnecessary delays, expenses, and disputes.