Mandatory Distribution

Mandatory distribution is a provision within a trust document that requires the trustee to distribute the assets according to the specified criteria or schedule, regardless of the beneficiaries’ needs, tax situation, or credit situation. The distribution may be based on the beneficiary’s age, set at certain intervals, or triggered by certain events outlined in the trust document. 

When a trust includes a mandatory distribution provision, the trustee is legally obligated to distribute the assets according to the terms outlined in the trust document. The trustee does not have the authority to withhold or delay distributions at their own discretion unless specifically stated in the trust document. 

In many cases, mandatory distribution provisions are used to ensure that beneficiaries’ financial needs are met while protecting their long-term interests. For example, a trust document may stipulate that the trustee must distribute all income to the surviving spouse at least annually.