November 2nd, 2011
Discretionary distributions of trust corpus probably rank near the top of trustees‘ or trust administrators‘ headaches. No matter how the discretion is exercised someone is going to be angry – maybe even angry enough to sue. Either the beneficiary requesting the encroachment will complain that it’s not enough or the remainder beneficiaries will complain that it was too much.
Corporate trustees have gotten pretty good at documenting and formalizing the manner in which they handle discretionary distributions, usually routing the requests through committees. In making a discretionary distribution, one question will always come up: “Do I have to consider the beneficiary’s other means of support?” Some states, like Georgia, have statutes stating that, in the absence of a trust provision to the contrary, a trustee has no duty to investigate a beneficiary’s resources prior to making a discretionary distribution. Other states do not.