So, you just lost a loved one, and now you’re drowning in paperwork, bombarded with legalese, and worried about where the money’s going. Dealing with their estate can feel like deciphering a secret code… Disbursements and distributions? Is that even English?
These terms might sound fancy, but understanding them can save you a ton of headaches, money, and time down the line. Now, if this scenario is giving you Deja Vu and you’re already in the thick of managing a trust or estate, you’re probably asking yourself, What’s the difference between a disbursement and distribution?
At Marcia L. Campbell CPA, we’ve helped countless people fulfill their trustee and executor duties for years, including managing distributions and disbursements. This guide will break down the difference between the two so you can ensure your loved one’s wishes are met, their legacy goes where it’s meant to, and you do everything according to the complex laws that govern trusts and estates.
Setting the Stage for Trust Distribution and Estate Disbursement
Grief is tough enough, so you shouldn’t let money slip through your fingers. To better illustrate the situation, allow us to set the scene.
Imagine this: You’re already grappling with the immense loss of a loved one. The world feels muted and shrouded in grief as you try to reach a place of closure, healing, and acceptance. You’ve been named the trustee or executor, and you initially feel tremendous honor that you have been entrusted with carrying out their final wishes and cementing their legacy.
Then, reality hits. Bills pile up, creditors call, and a mountain of paperwork explodes on your dining room table while you try to juggle your personal and professional obligations with mourning and fulfilling your duties as a trustee or executor. Terms like “disbursements” and “distributions” swirl around you like an alien language in your time of need.
As you start to take on these responsibilities, it dawns on you that settling an estate is a financial labyrinth and a minefield of potential pitfalls and complex legal language. One wrong move could leave you personally liable or undermine your loved one’s final wishes, which could have devastating consequences on the inheritance you stand to gain and the legacy they leave behind.
As you try to perform these responsibilities, it starts feeling impossible to learn and understand all the trust and probate laws in conjunction with interpreting the complex language in the trust or will. Overwhelmed, frustrated, and distraught, you feel like you’re trying to move a mountain.
Unfortunately, this is all too familiar for many people, and you might be experiencing this dilemma yourself. For you, little to no imagination may be necessary to understand this predicament. But what if you didn’t have to navigate this alone? What if there was a guide, a Rosetta Stone, to decipher the legalese and ensure a smooth, stress-free process?
We know this can feel like an overwhelming task, but it doesn’t have to be. With the help of professional trust or probate accountants, you can navigate the complexities of disbursements, distributions, and everything in between to ensure their legacy is passed on exactly how they intended, with peace of mind, a clear conscience, and a faster road to closure.
Together, we can move mountains to clear your path to healing and closure.
Disbursement vs. Distribution: What You Should Know
When it comes to trusts, it can be difficult to know who does what and what your responsibilities are. The most important role in a trust is the trustee. It is the responsibility of a trustee to disburse or distribute funds from the trust. While these actions may sound similar, they mean different things and have different purposes.
What are Disbursements?
First things first: As the trustee of a trust, you must settle debts owed by the creator of the trust. This is called disbursement. It is your job to ensure that the estate’s assets can pay off what is owed. It is important to prioritize what debts are paid first by calling the deceased’s creditors.
“What you should know is that legitimate outstanding debt takes precedence, so paying off secured debts, such as mortgages and car loans, should be paid off before unsecured debts, like credit card debt or medical bills. This responsibility is something that people sometimes don’t realize.”
– Marcia L. Campbell, CPA, Trust Accountant, and Probate Accountant
Related Article: Probate: What is it and When Do You Need It?
What is Distribution?
Once disbursement is complete, meaning all debts and final taxes are paid, a trustee can distribute the inheritance to beneficiaries. This is called distribution and is only then that money should be paid to the benefit or care of the beneficiary.
It can be difficult to settle an estate, so do everything by the book and with care. This process can be incredibly stressful as beneficiaries may taunt or encourage you to distribute funds prematurely, but this is a mistake. Ensure you settle funds first so you don’t pay for it later – literally.
Related Article: How to Avoid Probate With Living Trusts
What About Probate?
We mentioned that probate may come into play if there are insufficient funds, and a judge must prioritize debts. However, probate is also possible when the trust in question was not thoughtfully planned or is undergoing litigation from beneficiaries.
The trust will then be sent to probate court to determine how to distribute the inheritance. Regardless of probate, it’s critical that a trustee keeps cool and maintains an accurate trust accounting.
What’s the Difference Between a Disbursement and Distribution?
The process of settling a deceased person’s estate can be very complicated, and your role as executor or trustee can feel very overwhelming. Settling an estate to adhere to the deceased’s final wishes is an important and demanding job. Here are the duties and responsibilities you have to ensure that all the deceased’s expenses are paid before you can make distributions to the beneficiaries.
Disbursements: What Needs to Happen First
Disbursements are payments made from the estate to pay debts of the deceased, funeral bills, and all ongoing costs of administering the estate (funeral expenses, storage fees, and attorney’s fees).
Remember, as the executor, it is your responsibility to determine if the estate’s assets can cover all outstanding debts and bills. If there is not enough, a probate judge will prioritize the debts that should be paid.
You may need to review bank statements and other financial documents to determine what bills need to be paid. This can include final bills for things like credit cards, cell phones, and outstanding medical bills. Secured debts, such as mortgages or car loans, must also be settled.
Related Article: What to Expect When Taking Over Your Elderly Parent’s Responsibilities
Distributions: What Needs to Happen First
A distribution is any money paid to the benefit or care of the beneficiary. After all of the disbursements are made, the deceased’s outstanding debts are settled, and all final taxes are paid, the executor can distribute the remaining assets to the beneficiaries.
In some cases, when there was no estate planning done (i.e.,. there was no living trust or will in place that laid out the distribution plan) or if there is litigation between the beneficiaries and the trustee during the disbursements, you may need to go to probate court.
When this happens, your distributions need to have the court’s blessing on the stipulation (agreement on how to distribute the inheritance). These are additional things to keep in mind if and when your distributions go through probate court:
- Preliminary Distributions: The process of settling an estate can sometimes be a long and drawn-out process, especially when litigation is involved. The process can simply be too long for elderly beneficiaries who are dependent upon the money tied up in probate. To address this issue, the courts may allow preliminary distributions to be made to the beneficiary before the estate is ready to be closed.
- Court Approval: The executor must obtain court approval by filing a notice petition with the court before making a preliminary distribution to a beneficiary. Pending approval, the court must find that the “distribution may be made without loss to creditors or injury to the estate or any interested person.” (Probate Code Section 11621) If the beneficiary is elderly and the other parties involved are not harmed, the court will likely uphold the petition.
- Avoid Premature Distributions: Settling an estate can be a very sensitive and daunting process. The executor must proceed with caution. As executor, you can potentially be held personally liable if premature distributions leave insufficient assets to cover the deceased’s unpaid bills, administrative expenses, or unpaid taxes.
Related Article: What’s the Difference Between Informal and Formal Court Accountings?
Need Help with Your Disbursements and Distributions? Let Us Help with a Trust or Court Accounting.
So, now you know the answer to, What’s the difference between a disbursement and distribution? Grief is a heavy burden to carry. Don’t let the financial complexities of settling your loved one’s estate add to your stress. You deserve a trust and probate accountant who can expertly guide you through disbursements, distributions, and all the legalese in between. We’ll ensure your loved one’s wishes are honored and their legacy is passed on smoothly.
Contact us today for a free consultation, and let us help you navigate this difficult time with peace of mind to reach a place of closure. 
I get a $1000 a month from a trust fund along with 4 of my other siblings. My dad won’t give us any other information. I want to know why can’t I have it all or at least buy a house or find out how much I have and when I can have it all.
Hi Crissy, thank you for reaching out. That’s not an easy question because it all depends on what the trust document says. If your Dad won’t give you the information, you might have to see an attorney to get your questions answered. If you do not have an attorney, please contact us and we will provide you with a referral: https://mcampbellcpa.com/contact/
How can I check if my late father had other investments, stocks and properties? The only thing I inherited is his money that’s was in his bank account. My situation is complicated because of my step mother.
Where or who can I go to check what other things I’m supposed to inherit?
Thank you for reaching out! There are several ways to find out if there are other investments in your father’s account. You will need to consult the trustee on his account, which might be your mother. Fill out a contact form if you wish to get help with this process.
In North Carolina, the Will is on file at the courthouse where the Will was Probated after the Court certifies the probate and assigns the Executor.
Anybody can view the Will in the records room. Also the Application for Probate and Letters details who the beneficiaries are and includes an inventory of the decedents assets including bank accounts and stocks and bonds. That is everything you need to know to find out if you are inheriting anything.
You can call the Probate Court and ask if things are on file if you give the name and date of death of the decedent. They are generally very nice and easy to deal with. With COVID you might have to arrange in advance.
Can the executive of the will disperse the money from the sale of deceased parents home to all the siblings or does a attorney have to do that
I have a difficult and psychologically abusive sibling who has wanted me to split payments on her attorney fees for our decedent’s estate inheritance. The demands on me to pay my portion have gone on for several months and when I explained that I’m having hardship and can’t pay anymore I was yelled at and told that I would never hear anything about the lawyer or the estate. If I am supposed to inherit from The decendant’s estates, why can’t the attorney deduct at disbursement? when I sent the attorney an email, my sibling yelled at me to not contact THEIR attorney. The sibling now ignores me. I’m afraid and don’t know what to do if anything. My sibling said no, the attorney will not wait to collect at disbursement time because legitimate lawyers don’t do that. Is this ever true?
I have an uncle in assisted living. My father has durable power of attorney and I am in second position for DPA. My father is executor of his estate upon death and I’m second executor. The question is. His will has stated 4 different entities to get a distribution upon death. But there won’t be enough money left to pay any of the said amounts completely and if the larger one is paid there will be nothing for the others. So how is it decided who gets a distribution and how much or a percent of the original stated amount?
Hi Rodney, thank you for reaching out to us. The answer to your question is going to be difficult to answer unless we have all the information. If you would like our assistance with your question, please fill out a contact form: https://mcampbellcpa.com/contact/
I have a sister and brother in law that have proven not to be trustworthy. They are driving my deceased (8/7/20)fathers truck and want the title transferred to them with a lien until the banks disperse my dads funds. What do you suggest?
Hi Catherine,
We are sorry to hear that. Here is an article that may help: https://mcampbellcpa.com/how-to-help-siblings-avoid-an-estate-battle/.
I am the executor of my dad’s estate. I can’t get my sister to pick a time and date to divide personal property that is in a storage unit.
therefore I can’t settle the estate account cuz that’s what pays for the storage unit.
Is there some way I can move this process along.
Hi David,
Here are some tips to help: https://mcampbellcpa.com/how-to-help-siblings-avoid-an-estate-battle/.
We hope this helps!
Would like to know how long does a fiduciary have to disperse funds left in an account as I am the only living relative
Donricardo, You can call our office at 1(951)686-3608 or fill out our contact form for more information: https://mcampbellcpa.com/contact/
My aunt has been thinking about how she can provide for her youngest daughter after she passes because she has had a really hard time finding a job lately. Making sure that she has a place to stay by giving her their home could be really useful but she isn’t sure how to do it. I’ll be sure to tell her about how she can make sure to make a living trust that lays out the distribution plan and include it into her inheritance.
Hi Adam,
Thank you for sharing your story! By informing her of her options, it will probably be great help! Thanks for reading our article!
My Aunt and Uncle passed away. My sister took care of everything as far as funeral and insurance. She has now asked me for a letter to give her permission to distribute.
Why would she need that?
Hi Lori,
There are many reasons why your sister may be asking for this.
However, there are specific details that we would need to know to give you the best answer.
Please fill out our contact form: https://mcampbellcpa.com/contact/ so we can further help you. Thank you!
Do I have to pay taxes on a cash disburement from a Trust that has been probated? The cash disbursement is coming from a cash account in Kansas and going to three beneficiaries, myself included. (I live in New York.) I am wondering if I should put any of the money in reserve to cover taxes at the end of the year.
Hi Vanessa,
Thank you for your question. There are a lot of factors that come into play when different states are involved. If you would like more help with your question, please fill out our contact form: https://mcampbellcpa.com/contact/. Thank you!
what schedule do i put items I sold on? and where do I account for the funds so my summary of account balances?
My mother passed away 8 years ago. My 5 siblings and myself have been receiving a yearly Beneficiary IRA disbursement since then. I recently was told that you can only receive disbursements for 10 years. What happens after that?
It’s good to know that the remaining assets are distributed after all debt is settled. I don’t want to get something that has a ton of debt on it. That would just cause too many problems for me to deal with right now.
Can one issue a final accounting if a small tax refund check is outstanding, assuming it is accounted for in the accounting?
My kids are getting an inheritance and it went to court on marc 23, 2021 for petition for final disbursement. How much longer til they revive their payout?
I didn’t know that disbursement is when the deceased pay their debts. My wife was talking to me about how we need a disbursement plan. I wonder if she meant a distribution plan for our kids.
So, I had a close friend that recieved 2 checks for her inheritance from an estate real recently for about $98000.00. She did not want to deposit them into any account under her name for fear of loosing her low income housing and her state ID bad expired……she asked me if I would deposit them into my bank account and I agreed. She endorsed the checks with her signature and I endorsed the checks as well above her signature. I also wrote both our state ID numbers by our names. The will is closed. I had misplaced the checks and then became very sick for about two weeks.. During this time period my friend passed away.. I deposited the checks into my bank account . I followed my banks policies to do this and my account was placed on hold…….the paying bank returned the checks to my bank and gave the reason of return as suspected forgery. Noone called the checks in as stolen and I can prove the I was at her residence when I recieved the checks endorsed over to me. I was issued a duplicate check that says I may use it the same way I would use the original checks. I called the executor and she asks me what the bank had told me and then informed me that she has the money and is going to distribute it to my friends children…….those checks were given to me and became leagally mine when she endorsed the over to me right? And the executor has no right to stop payment on or withdraw the money she already distributed to a beneficiary right? What do I do?
Hi, re; deceased person’s (a natural person) WILL, it has approx 36 beneficiaries, with names of grandsons and granddaughters, some of whom are minors (below 16years) and rest most are adults. The executor of the WILL, has been named in WILL, the Bank (in Ontario, Canada), who are processing the closure of investments and banking accounts at their institution, has now requested the following details for each of the beneficiaries listed in WILL, including for the executor, these are as follows: (1) full legal name for each beneficiary, (2) year of birth for each beneficiary listed in WILL, (3) country and city of residence for each beneficiary in WILL. We all of beneficiaries collectively believe that all of these information requirements is redundant and superflous and really not required, however, the local Bank insists that it is a regulatory requirement, as each and every beneficiary has to pass through a scan from the list of Anti Money Laundering offenders and blacklist, whatever, and they would only disburse to Executor after such an AML scan for each beneficiary and not just for Executor alone. We really do not understand, as the money will eventually be disbursed by Executor from Estate account to each beneficiary, so why the Bank needs unnecessary details and information of the other beneficiaries. They can do AML scan of Executor. The Bank insist and states it is a legal and regulatory requirement and all Banks in Canada will be doing the same.
We are not keen on giving this information and certainly not required for minors, etec, and even for others, and as a matter of logical reasoning.
Please help in how we can respond to the Banks requests, and whether such a request is valid.
Hello Nicolas. We can provide more information for you if you fill out a form on our contact page: https://mcampbellcpa.com/contact/.
It’s interesting that you mentioned the importance of having court approval to prevent misunderstandings. My best friend mentioned to me that he is hoping to find a reliable lawyer that can help him with his estate claim and asked if I have any idea what is the best option to do. Thanks to this informative article, I’ll be sure to tell him that he should consult a trusted estate lawyer as they can help him with his concerns.
My daughter’s grandfather passed away and his only living child asked her to sign a “waiver of disbursement” because his other child (my daughters father) had passed away. Does that waiver mean she signed away her inheritance?
Hi Jacki. We can provide more information for you if you fill out a form on our contact page: https://mcampbellcpa.com/contact/.
I just found out that I’m a beneficiary to my conclusions estate he died in2017, I was informed by the lawyer that handed his estate, i have to go though the court to get my funds. Can you tell me what forms I need to do this. I can not afford a lawyer. Thank you
Hi Laurel. If you fill out a form on our contact page, we can provide more information: https://mcampbellcpa.com/contact/.
I appreciated it when you shared that the process of resolving an estate can periodically be a lengthy and drawn-out process. It is best to work with a reliable service that can help with it. I would like to think if a family needs to sell a house, it should consider hiring a reliable service that can help to do so.
Hi, I’m curious as to when the date of disbursement would be if an estate was turned into a joint account, prior to the death of the family member. In this instance the funds were available to the executor before and after death. The will states division of the estate will be done at the time of disbursement. However that money has been used and spent by the executor leaving a lower amount to then be split up. Is this not in violation of the Will? Or does this only apply if it had gone to probate? It was done this way to avoid probate however by doing that it is now unclear when the “date of disbursement” is and if the money spent was legally owed to the beneficiaries. Does the executor in this case have the right to spend and share what’s left?
Hi James. If you fill out a form on our contact page, we can provide more information: https://mcampbellcpa.com/contact/.
There are so many blog i read right know but any one of them satisfy me but this one is so informative blog
Excellent post! Thank you for giving us an idea about this. Looking forward to the next one
Thank you for stating that it is your duty as the executor to ascertain whether the estate’s assets can pay off all outstanding debts and expenses. My buddy is the executor of the estate she shares with her ex-husband. After the divorce, they wish to appraise the assets and divide them equally. I’ll assist a friend in obtaining estate planning services so they may advise her on how to best use the assets in her estate, particularly to pay the expenses.