executor of a trust

What is the name of your state (only U.S. law)?
Illinois I am the executor of a living trust set up by my mother. The trust, which contains only cash and stocks, is to be divided equally between my brother, sister, and myself. My mother died in 2009. None of us are in need of the money at this time. Is there a time limit that I have to observe and distribute the money, or can it be held indefinitely? Are there tax considerations?

You will need to file fiduciary returns for the estate. One question on the return will be (after a year) to demand an explanation of why the estate has not been closed yet. If you, instead, file fiduciary returns for the now, irrevocable, trust, you can keep it open as long as you follow the trust document. However, since the trust generally pays more in taxes, most issue the K-1s to the beneficiaries to be taxed on the income and personal rates. Most people who are taxed on income, like to have some money in their hands representing the income.

I don't really see your reason for keeping the money in the trust. If a distribution can be made, it probably should be made.

Distribute the assets, close the trust and be done with it. The trust is taxed at a higher rate than individuals. There is no good reason to keep the trust in place.

You are the trustee of the trust and not the executor of the trust.

there is an excellent reason to keep the trust in place, if the trust document allows it, and the document has language in it regarding creditors.

as tq mentioned, you will need to file k1s for each beneficiary, and the income reported should be distributed to the beneficiaries.

the trust, held in this way, is akin to a pension plan - where the beneficiaries have an asset base that generates a certain amount of income for them each year.

TrustUser,

You said, "there is an excellent reason to keep the trust in place".

What is "the excellent reason"? Why would it be better than distributing the "cash and stocks" to let each beneficiary handle these assets as they wish? Trust tax rates are higher than individual rates. It serves no purpose to keep the assets within the trust.

did you actually read what i wrote ? i already stated what the reason was - it forms a more secure asset base, for which income can be derived on an annual basis. or if the asset is a house, it derives "use" benefit.

Huh? "More secure asset base"? What do you mean? Are you saying that because there are more assets the risk of loss is lessened to any individual?

"Use" value from a house? I still don't understand. In the first place we're talking about "cash and stocks", in the second, what is the difference between the trust owning it and the three beneficiaries owning it? (Well, except for the difficulties of having a trustee control rather than the owners. [Including compliance costs.])

I'm still uncertain as to the value. I think it should be distributed unless there is a compelling reason not to. Even if the trust is written in a spendthrift way, creditors can still get at what can be distributed. Since there is only a choice here (in that the beneficiaries *can* choose to distribute) there is no creditor protection.

hi tq,

assets left in trust can have creditor protection if certain clauses are in it (as you mentioned, typically called spendthrift).

i dont know how this trust is actually worded, which is why i originally stated depending on how the trust is worded.

if there had been a house in the trust, it would also have that sort of creditor protection.

also, keeping assets in trust keep them from being looked upon under estate tax rules again, until such time that they are distributed. that could have worth to it, from a taxation standpoint.

TrustUser,

Yes, I actually read what you wrote ? you already stated what the reason was - it forms a more secure asset base, for which income can be derived on an annual basis.

I don't think there is any reason why there would be "a more secure asset base, for which income can be derived on an annual basis". The trust would not have any tax advantages over the distributed individual ownership of the assets. Especially since this discussion is about "cash and stocks".

I still don't understand your "excellent reason"? There would not be near the flexibility for the beneficiaries compared to individual ownership. I still say that this trust should be liquidated as soon as possible.

that is because you dont yet understand the security that a trust can bring. why do you think that the rockefellers have a family trust, as opposed to distributing all the assets to individuals ?

let me repeat for you, for the third time. if the trust has the proper clauses, there is creditor protection for those assets while in the trust, where there would not be any if it was held individually. THIS IS WHY IT IS A MORE SECURE BASE.

and again, it might have estate tax advantages in the future. the mother's estate, trust assets and non-trust assets, all get lumped together from the federal point of view. and if the estate warrants an estate tax, then one will be charged.

while those assets remain in trust, it does not get viewed again for federal estate taxes, until the assets are distributed.

i would say that typically, the best way of doing it is to keep assets in trust, until such time when there is enough beneficiaries such that the individual amount owned by any one beneficiary (assuming equal distribution) is small enough, such that it no longer is useful to keep in the trust.

that could be several generations, depending on the trust worth, and the number of beneficiaries.

You are putting in too many contingencies of trust structure to make your points valid. This trust has already been written. It most likely does not have any "creditor protection".

This trust should be distributed immediately and terminated if it is written as most in generic terms.

2mar: What is the value of the assets? Do any of you need protection from "creditors"?

your lack of knowledge has you back-pedaling.

you are the one making assumptions about the trust, and trusts in general.

fyi, spendthrift clauses are common in trusts. to assume that this one does not have one shows your lack of understanding.

what i stated was depending on how the trust was worded. in other words, it is possible that it does or does not have spendthrift clauses.

you simply assumed that it did not, because you obviously do not understand trusts, as i had to repeat three times for you why it was a more secure base.

half of the stuff you post about trusts is incorrect.

fyi, spendthrift clauses are common in trusts. to assume that this one does not have one shows your lack of understanding.

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This *cannot* be a "spendthrift" trust no matter the wording--based on the question being asked.

The trust, which contains only cash and stocks, is to be divided equally between my brother, sister, and myself. My mother died in 2009. None of us are in need of the money at this time. Is there a time limit that I have to observe and distribute the money, or can it be held indefinitely?

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A spendthrift must have ascertainable standards of distribution. Case law has repeatedly held that creditors have access to whatever the beneficiary has a right to be distributed even if it has not been distributed.

Here, it seems the OP is making a decision to distribute or not. If there is only a choice involved, even if it is the trustee's discretion to distribute or not, creditors can reach it.

let me repeat for you, for the third time. if the trust has the proper clauses, there is creditor protection for those assets while in the trust, where there would not be any if it was held individually.

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Think about what "the proper clauses" say. You can't just put out legal jargon and, BAM, creditors can't reach the money. It is their meaning which gives it the protection.

while those assets remain in trust, it does not get viewed again for federal estate taxes, until the assets are distributed.

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The trust is irrevocable. The only way the beneficiaries can pass the money to their children without there being an additional estate tax (or gift tax) consideration is if the children are successor beneficiaries and the beneficiary disclaims within 6 months of gaining rights to the funds. The trusts of the rich and famous are designed to never be fully distributed and are very complex in their management. I'm thinking we are not talking about that kind of trust here, nor that type of money. I see lots of trusts and have never seen one written in that manner. But then, I don't deal with the extremely wealthy and I'm sure there is a lot more of that in such a practice.

TrustUser,

You are certainly entitled to your opinion, as jaded as it is. But, for you to suggest that this trust should be held onto ("excellent reason to keep the trust in place") in perpetuity only because of a spendthrift clause is difficult to endorse. The people involved are adults and "none of us are in need of the money ...". That is an ideal time to end the trust. The assets in this trust should be distributed and the trust closed.

For you to support your position by making derogatory statements about the person you disagree is a little shaky. It doesn't fly.

hi tq,

i think we are mixing up thought processes of "trusts in general" with "this specific trust".

most of my statements had to do with "trusts in general" because i do not have the exact wording of this trust.

it is my thinking that if a beneficiary has the right to choose his own beneficiaries of his portion of an irrevocable trust, then he can do so, without having estate taxes again. do you disagree ?

for example, mom and dad die, leaving trust with 3 kids, each of whom have 2 kids of their own. if the trust allows for beneficiaries to name their own beneficiaries, then the 3 kids would each name each of their 2 kids as successor beneficiares. those 6 kids would in turn name their kids as successor beneficiaries. assets remain in trust, so never get distributed to individuals, until such time when the trustee realizes that it does not make sense any more to keep the trust active, due to the amount of assets compared to the number of beneficiaries.