Distribution of Inheritance

How an inheritance is distributed to heirs and beneficiaries is at the complete discretion of the Settlor. Settlors not only decide to whom they wish to leave their assets but also may control the manner and method in which it is distributed to the beneficiaries. Within the instruments of a Trust, a Settlor discloses every detail and instruction on how the inheritance should be distributed, which may also include conditions on allocations. This means that a beneficiary’s inheritance can be withheld if specific criteria are not met or the limitations detailed within the instruments have not come to fruition.

Age and milestone requirements are the most common conditions imposed within a Trust. Commonly, parents and grandparents with young children or grandchildren will require inheritance be withheld until they are fiscally responsible. Age requirements may require allocation in increments at different ages ( a set percentage distributed at specific ages) or a lump sum at a certain age. The HEMS standard also exists to guarantee beneficiaries’ proper use of assets. The HEMS standard bestows to the Trustee the power to determine, at their discretion, when a beneficiary may receive their inheritance. Under these conditions, the assets will be held within the Trust and distributed to the beneficiary exclusively for health, education, maintenance, or support. Similarly, Settlors also impose provisions that make receiving inheritance contingent on beneficiaries obtaining degrees, getting married, having children, or abstaining from drugs and alcohol.

Conditional inheritance, especially provisions that rely solely on the judgment of the Trustee, can run the risk of creating legal disputes. This more commonly occurs when a Trustee abuses or breaches their fiduciary duties. Trustees who aim to exploit the conditional distribution terms can effectively lock a beneficiaries inheritance by refusing to comply with the instruments of the Trust and fairly allocate the assets. If this level of discretion is not placed in the right hands, a beneficiary can be circumstantially disinherited, despite being a member of the Trust.

If a beneficiary is being subjected to a lock share inheritance, legal remedies are available. A beneficiary can petition the probate court and challenge the Trust or request that the Trust be terminated. Additionally, a lawsuit can be filed to remove or suspend the Trustee or request the court to impose a Trustee surcharge ( i.e. make the Trustee pay a beneficiary back for improperly distributed and withheld funds).

If you are in a similar circumstance and are undergoing an inheritance dispute, please contact The Inheritance Recovery Attorneys. Our firm offers free consultations and specializes in trust and will litigation. We are here to help you protect your inheritance and ensure your loved one’s wishes are fulfilled honestly.