Expert: Alexander J. Hay - 3/2/2008

Question
My father-in-law passed away in February. We live in AZ. I was appointed successor trustee. One contingent beneficiary is causing problems because of their personal financial issues. There are two properties, annuities and life insurance in the trust. The is a interest only mortgage, credit cards and medical bills pending. I met with all beneficiaries while they were all together and told them the outstanding bills would be paid before any money is disbursed to beneficiaries. All agreed that was a good thing to do. Now there seems to be a hurry to disburse funds. Am I taking the right actions by paying bills first? If the trust does not specifically state so, do the beneficiaries have a right to the copy of the trust? Thanks

Answer
I am presuming that this is a standard Living Trust, not an asset protection system.

Yes, you must pay the bills before distributing any assets. Otherwise you and the other beneficiaries will all be personally liable for the bills.  The only exception would be a mortgage on a house which you do not intend to keep, and no other property to distribute. You must pay bills of the estate before distributing assets.

All beneficiaries have a right to a copy of the trust. They also have a right to reasonable accounting information about the status of the trust. They do not have a right to pester the trustee every day about the balances, etc.