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How to Properly Distribute Trust Assets to Beneficiaries

When the time comes to distribute assets to Trust beneficiaries, there are a number of ways to do so. When a Trust consists solely of cash, then the distribution is easy. The Trustee can write a few checks, make the Trust distribution, and end the Trust administration.


If the Trust has Assets Other than Cash

When the Trust has assets other than cash, then the handover to beneficiaries can be a bit more involved. For example, when a Trust distributes real estate to beneficiaries, then the Trustee would sign a deed and file that deed with the county recorder’s office. Of course, the real estate can always be sold and the proceeds distributed to the Trust beneficiaries. But real estate can also be deeded out of the Trust and into the name of the Trust beneficiaries as joint owners. Some beneficiaries prefer this form of distribution and others don’t. For those people who want to jointly own real estate with other Trust beneficiaries, deeding property out of the Trust is an easy option.

When it comes to stocks and bonds, those also can be transferred out of the trust without being sold. The trustee can set up new brokerage accounts in the name of the beneficiaries, or the beneficiaries can create their own brokerage accounts at an institution of their choosing. The Trustee can then instruct that all stocks and bonds be transferred “in-kind” (meaning without being sold) to the Trust beneficiaries. This can be a great way to make a Trust distribution without incurring capital gains tax.

Business interests can also be transferred using stock certificates and assignments. If the Trust owns a closely-held business that will pass to one or more Trust beneficiaries, that transfer can take place with some easy paperwork. A new stock certificate can be typed up and signed by the Trustee along with an assignment. These documents will then prove the transfer of business interests to the Trust beneficiaries.

The bottom line: every asset has its way of being transferred. A Trustee does not necessarily have to sell every asset to make a distribution of Trust assets. If you want to continue owning a Trust asset (without it being sold), then talk to your Trustee about making an “in-kind” Trust distribution of that asset to you.