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Preliminary Distributions

Let’s say that you just found out that you’re the beneficiary of a $3 million trust fund, and there are a total of three beneficiaries. Each beneficiary stands to receive $1 million dollars. That is an exciting day that doesn’t happen to many people.

You wonder when you are going to receive the $1 million. You reach out to the trustee and the trustee says that it is going to be at least a year and a half to two years before the trustee can complete the trust administration and then the trustee will distribute your share of the trust to you.

What is a Preliminary Distribution?

Well, that is not the way it should happen. You really should not have to wait that long to receive a distribution. In California, trustees are permitted and encouraged to make what are called preliminary distributions. A preliminary distribution is a distribution that is made well before the final distribution when the trustee completes the trust administration.

If the trust contains $3 million, the way the courts look at this is— does the trustee need all $3 million to complete the trust administration? In most cases, the answer is “No.” The trustee might need $100,000 to $300,000 to complete the trust administration. If that’s the case, the trustee can make a rather sizeable preliminary distribution to each one of the trust beneficiaries on an interim basis.

Remember, in this case, we have three beneficiaries. Each beneficiary is supposed to get approximately $1 million. It would not be unheard of to have a trustee distribute $500,000 or maybe even $600,000 or $700,000 to each beneficiary. There would still be enough left over to complete the trust administration.

If a trustee refuses to make a preliminary distribution, then you should seek the advice of a knowledgeable California trust litigation attorney who can go to the Probate Court and ask a judge to order the trustee to make a distribution to the beneficiaries. In most cases, we believe that the court would make a distribution of that large amount in a preliminary distribution.