Tuesday, January 29, 2013
Is an inheritance held in trust for a child paid to the parent?
Posted by Lynne Butler
"My aunt left a will and probate has been done, and distribution of funds has been received. My question is about residue which is left to my twins, both 16 yr old children. The trustee is the executor. How long do they take to settle or close the case and distribute whatever is left over? And do trustees pass over the funds to the guardian, which is the mother?"
I'll tackle the questions one at a time. The first question is about how long it takes for an executor to wind up and estate and pay out the residue of the estate. The answer will depend on a couple of things.
The residue of the estate is not paid out until all of the bills and liabilities of the estate have been paid. Bills themselves are not usually a problem, but it can take a while to have tax returns done, pay the taxes, and receive a Clearance Certificate from Canada Revenue Agency. Because of this, the time it takes to wrap up an estate varies widely.
On a related note, the time that elapses before pay-out also depends on whether or not the executor is willing to make an interim distribution before the Clearance Certificate is received. Most executors by far do this, but they are not required to do so.
As a general rule, you should expect an estate to be wound up and paid out within a year of the death of the testator unless there are complications such as a lawsuit, or complex assets to deal with.
Your second question asks whether the trustee will pay the children's funds over to the guardian. Generally, no they don't. They have been given the job to look after the money for a certain amount of time in a certain way, and they can't make sure that 's done if they give the money to someone else to look after. Being someone's mother doesn't entitle you to receive money in a trust for them, though most parents are pretty annoyed when they hear this.
Also keep in mind that often trusts are written so that if a child should pass away before the end of the trust, the money left over is to be paid to someone else. Obviously this is unlikely to happen if the money has all been paid out to the guardian.
The most important factor in determining whether the children's funds may be paid to their parent is the wording in the will itself. Specific wording in a will always over-rides the general rule.