How Long Does a Trustee Have to Distribute Assets in California?

Your mom died three months ago. She had a living trust. You and your siblings are the beneficiaries. So when do you get your inheritance? It depends.

California law does not give a trustee 30 days, 60 days, six months, or any other fixed deadline to distribute the trust assets. The trustee has a job to do, and the amount of time needed depends on the assets and what has to be done in the administration.

But that does not mean the trustee can take forever.

The trustee has to move the administration forward and distribute the trust assets within a reasonable period of time.

What is reasonable depends on the trust administration.

Most Trust Administrations Take Several Months

A typical California trust administration will often take about four to six months.

Some are faster. Some take much longer.

If Mom owned a home, a brokerage account, and a bank account, and everything is titled in the trust, the administration may be pretty straightforward.

The trustee needs to take control of the assets, send the required notices, get date-of-death values, sell or distribute the home, deal with the investment accounts, pay expenses, prepare the trust accounting, determine how much money should remain in reserve, and then make distributions.

We walk through that process in California Trustee Timeline: Day 1 Through Day 180.

Four to six months is not a legal deadline. It is simply a reasonable timeframe for many uncomplicated trust administrations.

There Is No Magic Distribution Deadline

We sometimes hear from beneficiaries who believe the trustee has 30 days or 60 days to distribute the trust.

That is not the law.

California Probate Code does not contain a general rule saying that a trustee must distribute all of the trust assets within a certain number of days after someone dies.

Instead, the trustee has to complete the administration.

Think about what would happen if the law required the trustee to distribute everything within 60 days.

The family home may not even be listed for sale yet.

The brokerage company may still be processing the trustee's paperwork.

The trustee may not even have identified all the assets.

There may be bills that have not arrived yet.

And the beneficiaries still have time to contest the trust.

The 120-Day Trust Contest Period

One of the first things the successor trustee should do is send the California Probate Code section 16061.7 Notice to the beneficiaries and the deceased person's legal heirs.

We discuss that notice in What Is California Probate Code Section 16061.7?

The notice starts the deadline for contesting the trust.

As a practical matter, we generally do not recommend that a trustee make substantial distributions while the 120-day contest period is still running.

Why?

Because if the trustee distributes the money and someone then files a trust contest, the trustee may have a difficult time getting the money back. Also, the trustee will need to retain a trust litigation attorney to defend against the trust contest.

That does not mean a trustee must always wait the entire contest period.

In many cases, beneficiaries can waive the remaining contest period so the trustee can make distributions sooner.

The Trustee Has Work to Do Before Making Distributions

The trustee's job is not simply to find the money and divide it up.

Before making the final distributions, the trustee needs to understand what the trust owns and what the trust owes.

That usually means locating the assets, determining how they are titled, securing the property, obtaining values, paying bills, dealing with taxes, selling or transferring assets, and keeping good records.

Our article Trust Inventory: Locate, Protect, and Value Trust Assets explains why the inventory comes before the distributions.

Selling the Family Home

For many California families, the home is the asset that takes the most time to liquidate. If the trustee and beneficiaries have agreed to sell the home, the work must begin to get the home ready for sale, and this could take a while:

Clear out the personal property. And if this is the childhood home, there will be decades of accumulated "treasures" which may take more time to distribute among the beneficiaries and dispose of than any repairs and upgrades to the home.

Make repairs and upgrades to the home.

Find a realtor.

Enter into a contract and get through escrow.

We discuss these issues separately in What to Do With the Family Home in a California Trust Administration.

If the trust owns a $1 million home and very little cash, there may simply be nothing substantial to distribute until the home is sold.

That is not the trustee delaying the administration; it's just the process.

Accounting

Before making distributions, the trustee should also be able to show the beneficiaries what happened to the trust assets. What did the trust own when the person died? What was sold? What money came in? What bills and expenses were paid? What assets remain? How much will be held in reserve? And how much will each beneficiary receive?

The purpose of the trust accounting is to tell the story of the trust assets in a clear, transparent, and honest way, so the beneficiaries can understand the numbers and sign off on their expected distributions with confidence.

We explain the process in How to Prepare a California Trust Accounting.

Do You Really Have to Wait Until Everything Is Finished?

No. Sometimes the situation will allow the trustee to make a partial distribution.

Suppose the trustee has $800,000 sitting in the trust bank account. Most of the bills have been paid. The 120-day contest period has expired. But maybe sale of the home is dragging on.

If the other assets have been liquidated and are ready to distribute, the trustee could make a partial distribution while waiting on the home to close.

We discuss this in detail in Can a Trustee Make Partial Distributions?

A partial distribution is often the best answer when most of the administration is done, but one issue is taking longer than expected.

A Beneficiary Needing the Money Does Not Create a Deadline

This comes up all the time.

A beneficiary calls the trustee and says he needs his inheritance immediately.

The mortgage is due.

The credit cards are maxed out.

He is buying a house.

His business needs money.

His wife will leave him.

His dog may run away.

But ask this question:

What would the beneficiary have done if Mom had not died? Why did Mom's death suddenly create this cash crisis?

A beneficiary's financial needs do not create a new deadline for the trustee. The trustee has a fiduciary duty to administer the trust properly for all of the beneficiaries. That means the trustee cannot make an unwise and emotional distribution simply because one beneficiary is making the most noise.

But the Trustee Cannot Drag It Out Forever

Everything above explains why a trust administration takes time.

But there is another side to this. The trustee cannot simply sit on the trust. If six months have passed and the trustee has done almost nothing, that is a problem. If the house could have been sold months ago but the trustee has not listed it, that may be a problem. If all of the assets are cash, the bills and taxes have been handled, the accounting is complete, and the trustee still refuses to distribute the money, the beneficiaries are entitled to ask why.

A trustee has a job to do.

California does not impose a fixed distribution deadline, but that does not give the trustee permission to delay the administration unnecessarily.

Start by Asking What Is Holding Things Up

If you are a beneficiary and think the administration is taking too long, start with a simple question:

What remains to be done?

Maybe the trustee is waiting for the house to sell. Maybe the trustee is waiting for information from a brokerage company. Maybe there is a legitimate dispute over an asset. Or maybe the trustee really has done nothing.

You cannot tell whether a delay is reasonable without knowing what is causing it.

This is why communication between the trustee and beneficiaries is so important.

We discussed this from the beneficiary's perspective in What Are a Beneficiary's Rights in a California Trust Administration?

The beneficiaries should give the trustee reasonable time to do the job, but the trustee needs to keep the beneficiaries reasonably informed.

When Does a Beneficiary Need an Attorney?

Most of the time, a beneficiary does not need to hire an attorney just because the trust administration has been open for several months. Several months is normal. But there is a difference between an administration taking time and an administration going nowhere.

If the trustee will not communicate, will not provide an accounting, refuses to make distributions when there is no legitimate reason to hold the assets, or appears to be misusing trust property, then the beneficiary may need independent legal advice.

A trust litigation attorney can usually get the trustee's attention and, if necessary, ask the probate court to step in. Usually, a few emails and phone calls will rattle the cage enough to get the trustee's attention. If the situation is really bad, the attorney can file a petition with the probate court and ask the court to take over oversight of the trust administration. California probate courts have broad authority over trust administrations. A beneficiary can ask the court to instruct the trustee, require an accounting, address a breach of trust, or in serious cases remove the trustee.

So How Long Should You Expect to Wait?

Four to six months is a common window for the main distribution. The trustee will usually hold a reserve for taxes and late bills, and that remainder is paid later. A trust with a house that takes a long time to sell, complicated tax issues, hard-to-transfer assets, or beneficiary disputes may take much longer. A very simple trust may be ready for distribution sooner.

The better question is not:

How many months has it been?

The better question is:

What remains to be done, and is the trustee moving the administration forward?

If the trustee is doing the work, communicating with the beneficiaries, and moving toward distribution, the administration is probably proceeding as it should. But if nothing is happening and there is no good explanation, there could be a problem.

California does not impose a single deadline for a trustee to distribute trust assets. The trustee needs a reasonable amount of time to administer the trust properly. That means collecting and valuing the assets, dealing with the required notices, paying expenses and taxes, selling or transferring property, preparing the accounting, keeping an appropriate reserve, and then making distributions.

The trustee should not rush and create problems. But the trustee should not unnecessarily delay things either.

Most beneficiaries understand that the process takes time when they know what is happening. Most problems arise when months pass, nothing seems to be happening, and nobody is communicating.

If you are a successor trustee or beneficiary and have questions about the timing of distributions in a California trust administration, contact us to schedule a free initial 15 minute call with one of our estate planning attorneys.

Clark Allison LLP assists clients throughout California, meeting with clients in person at our El Dorado Hills and Roseville offices and virtually throughout the state.