When Can Trust Money Be Paid Out?

by Diana Wicks; Updated September 26, 2017

A trust is a legal or fiduciary relationship created between a grantor, a trustee and a beneficiary. Trusts are generally created to allow the owner of properties to hold these properties and assets as his own for his benefit and that of the beneficiary. There are different types of trusts, all of which are created and regulated by state trust laws. The time upon which trust money can be paid out to beneficiaries of a trust largely depends on the type of trust established, as well as the terms set by the grantor in the trust.

Living Trust

Living trusts are also known inter vivos. As the name suggests, these are trusts that are created when the grantor is still alive. The purpose of creating a living trust is to avoid interstate distribution of assets and properties belonging to the owner. Living trusts also allow beneficiaries to receive trust money while the grantor is still alive. The trustee who administers the trust pays out the money as stipulated by the grantor in the trust. Because a living trust is generally revocable, the grantor has the right to change the manner and time when the trust money can be paid out.

Testamentary Trust

Testamentary trusts are also known as after-death trusts. They are created through a probate process in which the probate court decides how the trust money and other assets will be distributed among the beneficiaries. This means that the trust money will be paid out after the completion of the probate process. Yet it is possible for a living grantor to create a trust that only pays the trust money out when the grantor is deceased.

Simple and Complex Trust

Trusts may also be simple or complex, and this equally determines when the trust money is paid out. Simple trusts are those trusts that distribute all the money and assets in the trust at one go or "currently." According to the Internal Revenue Service (IRS), a simple trust is categorized as such if it is not a grantor’s trust -- the grantor does not retain control of how the assets will be distributed once the trust is established. A complex trust is one that pays out trust money after this money has accumulated over a period of time. The period is usually stipulated in the trust, and beneficiaries cannot access trust funds until this period of time elapses.

Age Limitations

The time upon which the trust money can be paid may also be determined by age limits prescribed in the trust. Some trusts require that beneficiaries begin receiving trust funds after the youngest beneficiary becomes a certain age. Others require that a beneficiary access some of his money at a certain age and then receive the remainder on a later date. This is especially applicable to under-age beneficiaries whose grantors wish that the trust money be used for expenses such as college fees.

About the Author

Diana Wicks is a Canadian residing in Vancouver. She began writing in 2004 while still a student at Lincoln School of Journalism, in the city of London. She has worked as Chief Editor of Business Chronicle, an online magazine based in London. Wicks holds a Bachelor of Arts (Honors) in journalism and a Master of Business Administration from the London School of Economics.