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Post: The Moneyist: ‘The bank has paid itself $18,000 in monthly fees’: After six months, my late father’s trust has not been distributed. What can I do?

Dear Quentin,

My father’s father set up a trust at a major bank with my father and the bank’s trust department as co-trustees. My father died at the end of last year; upon his death, the trust was supposed to be distributed equally to the six remainders (my father’s children from two marriages). 

It’s November and the trust still hasn’t been distributed. The bank has paid itself $18,000 in monthly fees. I contacted them many times over the past 10 months via email and telephone, and they have made endless excuses as to why the disbursement has not occurred.

It’s obviously not in the bank’s interest to speed this process along since they’re making a tidy sum in fees every month. Additionally, they wired money to my father’s bank account 10 days after his death and it appears that no attempt was made to have it returned.

How long should a trust dissolution managed by a major bank take? What is their fiduciary responsibility and what recourse do the remainders have to hold the bank accountable? This has gone on too long, and I am at the end of my tether. Any advice?

Enough Already

Dear Enough,

That’s a lot of fees and, as you say, the bank has plenty of reasons to take its sweet time. But distributing trusts can also be a complicated and drawn-out procedure. Beneficiaries are obviously on tender hooks, perhaps understandably waiting for their own piece of the pie.

Talk to the bank, the trust manager and/or their manager, and ask them the questions you asked me. Why is it taking so long? Tax filings can delay the process for months. Can they give you an estimate of how long it will take? You have every right to timely and accurate information.

Why has the money that was wired to your father’s account not been recovered? The bank appears to have taken its eye off the ball. You can absolutely remind the trust officer that they have a fiduciary duty to the beneficiaries, and you can petition the court to remove them as trustee.

Doug Sherry, president of Arden Trust Company with offices in seven U.S. states, including California and Florida, empathizes with your predicament, but also points out that a reasonable amount of time for one type of trust may be unreasonable or lengthy for another. 

“The type of assets held in the trust is a factor that directly impacts the length of time until a distribution can be made, especially where you have multiple remaindermen,” he says. “Specialty assets, such as real estate, must be valued and possibly sold prior to distribution.” 

“Some assets, such as closely held limited partnership interests, may require that the interest be offered first to the other partners before a transfer of the interests can be made to the remaindermen,” Sherry adds.

Sherry says there is another spanner in the works that can delay distribution of assets. “Disagreement between beneficiaries as to the allocation of assets to certain shares or whether assets should be sold may also add time to the distribution process.”

While there may be good reasons for an administration to last longer than you may wish, the trustee should be in contact with you and the rest of the beneficiaries throughout the process. You should receive a final accounting and an estimated timeframe for the distribution to occur.  

Similarly, David Handler, a partner in trusts and estates at Kirkland & Ellis, which has offices in the U.S. and overseas, says the time it takes to wrap up a trust depends on the type of trust. An irrevocable trust can oftentimes take longer than a revocable trust, for instance.

You may not be fully aware of the nature of this trust. “The fact that his father was a co-trustee suggests that this may have been a revocable trust,” Handler told me. “If so, the estate administration needs to be coordinated with the trust, which might hold most or all of the father’s assets.”

“If it was an irrevocable trust and the assets were not part of the father’s estate for tax purposes, then disbursement should occur fairly quickly,” he adds. “But even then, there could be illiquid assets that are difficult to transfer or are perhaps being liquidated.”

Delays are not always due to nefarious reasons, but you should be kept informed of the progress being made. This is a good time to establish regular communication with the trustee, and hopefully then you can avoid an even more time consuming court action later on.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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