Legal Definitions - trust distribution

A trust distribution occurs when a trustee releases assets from a trust to one or more beneficiaries, in accordance with the specific instructions outlined in the trust agreement. These assets can include money, real estate, investments, or other property. Distributions can be made periodically (e.g., monthly, annually) or as a one-time payment, and may consist of income generated by the trust's assets, or a portion of the trust's principal (the original assets themselves). The timing, amount, and conditions for distributions are all governed by the terms established by the person who created the trust (the settlor).

• Example 1: Regular Income Payment

  A parent establishes a trust for their adult child, stipulating that the child receives $2,500 per month from the trust's income to help with living expenses. Each month, the trustee transfers this amount to the child's bank account.

  This monthly payment of $2,500 is a trust distribution because the trustee is releasing a specified amount of money from the trust's assets to the beneficiary according to the trust's terms, providing regular financial support.

• Example 2: Specific Purpose Distribution

  A grandparent creates a trust to fund their grandchild's college education. The trust agreement allows the trustee to pay tuition directly to the university or reimburse the grandchild for educational expenses upon presentation of receipts. When the grandchild enrolls, the trustee pays the $15,000 tuition bill directly to the university.

  This payment of tuition is a trust distribution. The trustee is releasing trust assets (money) for the beneficiary's benefit, as directed by the trust document for the specific purpose of education.

• Example 3: Final Distribution Upon Termination

  A trust is established to provide for a spouse until their death. Upon the spouse's passing, the trust agreement directs the trustee to distribute all remaining assets equally among the couple's three children. After the spouse dies, the trustee liquidates the remaining investments and divides the proceeds, transferring an equal share to each child.

  The act of the trustee dividing and transferring the remaining assets to the three children after the spouse's death is a trust distribution. This is a final distribution that concludes the trust's purpose, transferring the principal and any accumulated income to the designated beneficiaries.