Revocable living trusts are a complex subject, but they can be of benefit to some people, depending on their situation and circumstances. In order to understand the distribution provisions for revocable living trusts in DC, or just to understand the trusts generally, it is advisable to consult with a local DC revocable living trusts attorney, who has experience and knowledge in this area.
Lifetime distributions are typically reserved for the initial grantor. During the grantor’s lifetime, a revocable living trust is often administered for the grantor’s benefit. Often, the grantor can receive distributions of income or principal in an unlimited amount.
Holding and Distributing the Principal
Distribution provisions often prescribe how a trust will be managed. During the grantor’s lifetime, often principal can be distributed for the benefit of the grantor. However, upon his death the trust provides provisions for the distribution of the principal. Some trustors choose to continue to hold the trust principal in further trust for beneficiaries. Some trustors choose to include provisions that allow for the termination of the trust and the distribution of the principal outright to beneficiaries. Other trustors use a hybrid model where they provide for staggered ages for when the principal should be distributed.
For example, when creating trusts for children, some individuals will say, “Upon my death, I want the principal of the trust to be distributed to my children when they attain the ages of 30 and then 35 and 40.” The next generation will receive 1/3 of the principal at 30, 1/3 of the principal at 35, and then the remainder of the principal at 40.
Distributions on the Grantor’s Death
Upon the grantor’s death, trusts often provide provisions for whether or not the trust principal will continue to be held in further trust for the benefit of the beneficiaries or whether the trust will terminate and the principal will be distributed outright to the beneficiaries.
Types of Payment
The terms of the trust will define what types of payments or distributions are to be made upon the death of the grantor. But generally, trusts include provisions to provide for the payments of administrative expenses, funeral expenses, income, inheritance, or estate tax if applicable.
Trusts often include provisions to determine whether the principal of the trust will continue to be held in trust for the benefit of the beneficiaries or whether the trust principal will be distributed outright to the beneficiaries.
Differences in the Grantor’s Reserved Powers and the Trustee’s Powers
The concepts of a revocable living trust can be very complex and this is one example of trust concepts that are often confused. The grantor and trustee, although they may be the same person, wear different hats during the trust administration procedure.
The grantor is the person that creates the trust. Often, because the grantor may also serve as one of the initial trustees, the roles of each position may become confusing. The trustee is a person who has the fiduciary obligation to manage the trust assets pursuant to the provisions of the trust. A trust document often includes the grantor’s reserved powers and trustee powers.
The grantor’s reserved powers are typically the right of the grantor to amend, revoke, withdraw funds or assets, and further fund the trust. The trustee’s powers are whatever powers the trustee has in the course of administering and managing the trust. Usually that involves the power to sell real estate, buy real estate, mortgage real estate, sell stock, and invest stock—any of the typical duties that would be required to manage the trust assets pursuant to the provisions of the trust.
Alleviating the Pressure Placed on a Trustee
One way to alleviate the pressure or the burden on a trustee is to name both an individual trustee and a corporate trustee, so that the trustee can bifurcate his duties and then allow the financial investment aspect of his duties be managed by a corporate trustee.
Another thing that a grantor can do is make sure that if he or she is serving as one of the initial trustees that he observes good record keeping.
Finally, an attorney can assist and advise a trustee of his or her fiduciary obligations. In addition, an attorney can prepare any accountings that may be required, and assist with creating a plan for distribution or further management.