Much has been written for trustees about the distribution function: how to understand various distribution standards (e.g., health, education and maintenance); how to deal with difficult or incapacitated beneficiaries; how to balance intergenerational considerations in making distributions. This note considers the distribution function from a different perspective: that of a responsible adult beneficiary. Although this may be the most seldom theorized or discussed scenario, it is also the most common. And in this least problematic of distribution cases, there remain many problematic issues.
In the essay posted below, I explore several key questions:
- How is a beneficiary to access funds? I argue that the three most obvious options–“asking,” “being asked,” and “waiting to receive”–are all compromised. Instead, trustees and inheritors must come up with a “non-ask-based” process for distribution decisions that will maximize the inheritor’s subjective experience of autonomy, adulthood, and differentiation.
- Who decides? In a legal sense, this is an easy question: the trustee decides. But a responsible adult beneficiary is likely to chafe against this answer. How can trustees and inheritors create a process that includes the beneficiary to the maximum extent possible?
- When? Are their ages or periods of life at which an inheritor should begin to access funds from a family trust? Is there some age that is too young? Can there be some age that is too old? I argue that a beneficiary should access funds once they have become self-sufficient such that they know in their heart that they do not need those funds to survive or thrive. This principle is designed to minimize the likelihood of distributions causing harm to an inheritor, and to maximize the potential upside.
- How much? For families used to spending lavishly, this is an easy question to answer: “as much as possible.” For very frugal families, the easy answer is the opposite: “as little as necessary.” But for those (most?) families in the middle, how should a trustee and inheritor think about the how much question? Should they “enrich just a bit,” “pay for certain categories of expenses,” or “create independence?” I argue for tying distribution amounts to the development or maturity of the inheritor–not to biological age.
I find these questions difficult and fascinating. I hope that others will continue to develop good architecture for how to think about distributions to responsible adult inheritors.