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Trustee Solutions: Disbursements (What You Can and Can't Pay For with Trust Money)

So you find yourself as a trustee of a trust and you have to make expenditures out of that trust.  And the question is, “What are appropriate expenditures?”

Well, let’s first talk about what your basic and primary job is a trustee and that is, as a trustee, you’re going to collect all the assets of the trust, you’re going to pay off all of the liabilities of the trust, and then you’re going to distribute what’s left over to the beneficiaries.  And that can take anywhere from a year to three years to complete.  It’s a long process.  It’s called a trust administration.



Well, during the trust administration, you’re going to make payments out to creditors of the trust or to people that are owed money from the decedent’s past, such as credit card companies or just the ongoing CPA costs for the tax returns for the trust, and so forth.

Those type of trust disbursements are appropriate.  And you, as a trustee, are allowed to pay those out of trust funds.

The trustee should not take their trustee fee right away and they also should not use the trust assets as their own bank account.  So if you’re going to the grocery story as a trustee and you forgot all of your checking accounts except the trust checking account, you can’t even buy that $3 gallon of milk, if that’s how much milk costs now.  You can’t do that.  That is a breach of trust.  And so don’t take trust assets and spend them on yourself.  They’re only to be spent for trust liabilities.