In California, beneficiaries can receive one of several different kinds of distributions from trusts. The type of distribution that a beneficiary will receive depends on the specific language of the trust.
A trustee can make a discretionary distribution at any time, based on the trustee’s good judgment about when to make it. The trustee should treat all beneficiaries similarly when deciding whether to make distributions. But that does not mean that all distributions must be exactly equal. One beneficiary could receive more discretionary distributions than the other if the trustee has a sound basis for making this decision. No beneficiary has the right to any distribution (unless the trust specifies a minimum distribution).
A support distribution clause in a trust requires a trustee to pay for the support of a beneficiary. The trust usually uses the word “support”, and may also say “maintenance”, “education”, or “health care”. Often support trusts have children as beneficiaries. People also make support trusts for adults who do not have disabilities but who cannot take care of all their needs themselves.
Discretionary Support Distribution
A discretionary support trust combines aspects of discretionary and support distributions. The trustee can make discretionary distributions to the beneficiaries to use for their support. Again, this type of trust can be used for a child or adult in need.
Special Needs Distribution
Finally, some trusts permit the trustees to make distributions because of the special needs of the beneficiaries. These special needs trust distributions can pay for expenses beyond what government benefits cover. To avoid losing eligibility for those government benefits, the trustee cannot have absolute discretion to make distributions. Instead, the trust language must be narrowly tailored so that money distributed to the beneficiary does not count against his or her income or resource limits for benefits such as Social Security and Medicaid.
Because each trust’s specific language may vary, you should speak to an attorney if you have any questions about what kind of trust distributions you can receive. If you are a trustee, you should make sure you understand exactly when you can make a distribution by asking a lawyer for advice.
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