Taxation & Estate Planning

Receipts and Distributions, part 1

By Joel A. Schoenmeyer

When I am advising a fiduciary (executor or trustee) about to make a distribution, I always list the pertinent steps in the following order:

1. Send out receipts for all beneficiaries to sign;

2. Once all signed receipts are in hand, send out checks.

This strikes some people as bass-ackwards -- how can a beneficiary sign a receipt for something he or she hasn't received? It's a good question. Essentially, the fiduciary can proceed in one of three ways:

-send money, then (hope to) get receipt
-exchange receipt for money simultaneously
-get receipt, then send money

The first of these is dangerous -- people get forgetful once their check is stashed securely in the bank. On the other hand, nobody responds faster than a beneficiary being told "once I get your receipt, you get your check." Case in point: I just sent receipts out to 16 trust beneficiaries all over the country, and received them all back (signed) within two weeks.

The second of these makes sense, but only if all of your beneficiaries are local.

The third works best, of course. You can easily find us (fiduciary and attorney) if you send in a receipt and don't get your money. The fiduciary will have to prove that he or she did indeed make the payments, which should be easy to do.

Full post as published by Death and Taxes Blog on November 25, 2008 (boomark / email).