Reallocate Trust Disbursements

What is the name of your state (only U.S. law)? Washington. My late father-in-law put his 5 daughters into a trust that receives periodic oil royalties from oil wells he developed while he was alive. Twice a year, disbursements are made to his daughters and once a year the trust files income taxes. Question - can the royalties go directly to his daughters rather than the trust? This would alleviate the burden on the executor and put the burden on his designates for tax filing purposes.

1) It is a trustee and not the "executor" that handles the trust.

2) You are thinking correctly. Individual taxes are generally less than the taxes on a trust. It would be less hassle if the children held the assets. But, you will need to read the language of the trust to see what is available for options.

3) From whom do the "oil royalties" come? Is it one organization? Have you spoken to that organization to find what they would require to make that happen? It wouldn't hurt to open up the conversation.

4) Who is the trustee?

I am a co-trustee - the other trustee is one of his daughters. It is an irrevocable trust.
The royalties come from three oil companies. Before starting conversations with all three, I had hoped to get some preliminary info as to whether or not this was worth pursueing.
All his other assets have been liquidated & disbursed. These royalties are the last remaining assets and could go on "forever" (as long as the wells keep producing) with slowly diminishing returns.

What does the irrevocable trust document say, regarding when and how the trust can be dissolved? The trust, is the owner of the oil rights.

There is no provision for disolvement in the existing trust document.
My thought is that the 5 girls comprise the trust; would there be a legal objection to each girl getting 1/5th of the distributions directly from the oil companies rather than the trust itself?

While it might be able to happen in reality (in that things are finessed by the trustee), in theory, no. If someone later objects, the trustee would be in breach of his fiduciary duties. If there is a change in taxation, the IRS might find out on audit and penalties and interest would flow to the trustee personally for the breach.

I still think the plan to get the trust out of this is the best plan. This will just get more complicated in time. Are all five beneficiaries in agreement?

I can't see how there could be a "breach of his fiduciary duties" if the trustee does nothing contrary to the trust document, especially if all beneficiaries are "on the same page".

My thought is that the 5 girls comprise the trust; would there be a legal objection to each girl getting 1/5th of the distributions directly from the oil companies rather than the trust itself?

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What does the trust document say, regarding who would get a girls share, if one of them dies? Does it get redistributed to the other 4 living, passed to a 2nd generation of the one that dies (if there are kids), to parents, to whom?

You're proposing to get agreement amongst the beneficiaries NOW, but what about the beneficiary situation in the future, say 2030?

Once the trust is out of the picture, each beneficiary could handle the succession as they see fit. By keeping it in a trust it just gets more complicated. When "jgmader" dies, successor trustees might not want the trouble of being a trustee for everyone else. Also, as this trust passes through generations there will be hundreds of potential beneficiaries to deal.

My vote is to explore all possible ways to simplify this situation now, before it gets "out of hand".

I can't see how there could be a "breach of his fiduciary duties" if the trustee does nothing contrary to the trust document, especially if all beneficiaries are "on the same page".

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The very essence of the question implies the trustee does not have the power to do this. If the rights can be disbursed, the trust document should say so.

As Kiawah says, beneficiaries can change. Also, beneficiaries minds can change. Doing what a beneficiary wants, if it violates the trust's terms, does not protect the trustee from suit. In fact, this is the very essence of many trusts which limit disbursements for spendthrift or age reasons.

The trust should be followed. If it says corpus should be disbursed and not just income, the rights to the payments can be disbursed. For some reason, I suspect it does not say this or the OP would not have written.

Maybe I am missing something, but what makes this asset any different than all of the other " assets have been liquidated & disbursed"?

I say this is just another asset that needs to be "disbursed/liquidated" to the beneficiaries and then be done with the trust. Keeping these diminishing assets in a trust will overwhelm the trust when they become less valuable and the beneficiary list becomes a nightmare. The trust will eventually have to be closed when assets are gone. Don't drag this out to an uneventful death.

I don't know what the difference is, but the OP seems to think there is one.