Trusts have many benefits, including protecting assets, minimizing taxes, avoiding probate, and helping family members manage financial affairs. Trusts can be revocable or irrevocable, offshore or domestic, for education or special needs, but they all hold assets for specific beneficiaries.
Whether you are a trust fund beneficiary or are considering transferring property into a trust, you may wonder, “How often can I pull assets out of my trust?” This post covers the basics of trust withdrawals, including the factors determining withdrawal frequency and best practices for managing withdrawals.
Frequency of Withdrawing Assets From a Trust
Can trust creators, beneficiaries, and administrators take out assets at any time? Or are withdrawals limited by amount or number? There is no single answer to the question, “How often can I pull assets out of my trust?” It depends on the specifics of your trust.
Factors Determining Withdrawal Frequency
Determining trust withdrawal frequency involves multiple factors, including the following:
Type of Trust
While many revocable trusts allow the grantor to make withdrawals at any time, the assets in irrevocable trusts cannot be removed. They can only be distributed according to the agreement, which cannot be changed.
Terms of the Trust Document
The trust’s terms often determine the asset distribution schedule, such as paying out all funds outright, on a schedule such as monthly or yearly, or after certain milestones such as turning 21 years of age or graduating from college.
Role of the Trustee
All trusts have three main roles. The “grantor” (also known as the “settlor” or “trustor”) is the person who creates the trust. The trustee is the individual or company that manages the assets. The beneficiaries are the designated recipients of the trust assets.
Depending on the trust’s terms, the trustee may have discretionary power to determine what a beneficiary receives and when.
General Guidelines for Withdrawals
Although the type of trust and its terms determine distribution and withdrawal rules, there are three primary ways for beneficiaries to receive trust assets:
- Lump sum: Beneficiaries receive assets all at once, typically without any conditions.
- Scheduled: Beneficiaries receive assets over time, such as every calendar quarter or half the trust balance at age 18 and the other half at age 30.
- Discretionary: The trustee decides the timing and amount the beneficiary receives.
How To Get Money Out of a Trust Fund
A trust fund typically provides long-term financial support for a beneficiary. Rather than receiving the entire balance at once, trust fund beneficiaries often receive disbursements at regular intervals or upon certain events.
If you’re wondering, “How often can I pull assets out of my trust fund?” the steps below may help:
Review the Trust Document
First, you’ll want to review the trust document. Like other kinds of trusts, trust funds can be revocable or irrevocable. They may specify a distribution schedule or triggering event, such as getting married or buying a home. They may also dictate what you can use the funds for, such as health care, education, or real estate.
Communicate Needs to the Trustee
When you need money from your trust fund, request it in writing from the trustee. Depending on the terms of the trust, they may disburse funds immediately. However, they also have a fiduciary duty to comply with the trust’s terms, so they may have to deny your request, delay it, or require additional information.
Prepare Any Required Documentation
If there are restrictions on the use of trust assets, you may need to show records to verify how the funds are being used. For example, suppose the trust stipulates that the money can only go toward education expenses. In that case, you may have to submit your university tuition bill to the trustee for payment or provide proof at the end of the year that you used your funds for college.
Respect the Trustee’s Discretion
Trustees have a legal duty to adhere to the terms of the trust, follow applicable laws, and act in the beneficiaries’ best interests. Although it can be frustrating not to receive the funds you feel entitled to, respecting their decision is important. If you believe a trustee is acting unethically or irresponsibly, you can petition the court for a replacement or hire an attorney to help.
Best Practices for Managing Trust Withdrawals
Whether you’re a grantor, a trustee, or a trust beneficiary, understanding your obligations and rights under the trust agreement is essential for a smooth distribution of assets. Consider the following best practices for managing trust withdrawals:
Regular Review of the Trust Terms
Grantors should review and update their trust terms every few years or when circumstances change, such as when a beneficiary comes of age, the trustee is replaced, or tax laws change. You may also want to modify the terms if assets increase or decrease significantly in value or if you want to change your investment strategy.
Consultation With Financial Advisors
Financial professionals can help grantors create trusts, update terms, and ensure legal compliance. They can also help trustees make investment decisions and manage trust assets. If you’re a beneficiary, let a financial advisor help you create a plan to make the most of your trust funds, whether a single inheritance or staggered distributions.
Balancing Immediate Needs With Long-Term Goals
Balancing short-term needs with long-term goals is at the heart of any financial plan. For example, a properly designed trust can help you generate income for living expenses while meeting charitable or estate-planning goals. The right investment strategy and distribution schedule can help ensure the grantor has enough to live on and something to leave their family when they pass.
Have questions for a trust attorney?
Trusts play an essential role in asset protection, helping shield your property from creditor claims and civil lawsuits. Asset protection is especially important for high-net-worth individuals and professionals in high-liability fields like medicine, law, or engineering.
Now that we’ve answered, “How often can I pull assets out of my trust?” Blake Harris Law is standing by for all your asset protection needs. For more information about secure ways to safeguard your wealth, contact us today for a free consultation.
