When Can the Trustee of a Revocable Trust in Massachusetts Make Distributions to the Beneficiaries without Incurring Personal Liability to the Deceased Settlor’s Creditors?

An impatient trust beneficiary in one of my cases began demanding distributions from the decedent’s revocable trust within a month of the settlor’s death. The Trustee has no problem making the earliest possible distributions, as long as the Trustee can have no personal liability for doing so. Other than unpaid income tax liabilities of the decedent, the only major problem that should be of concern to the Trustee could be a lawsuit against the trust by one of the decedent’s creditors.  Thus, the question is when, under current Massachusetts law, can a Trustee end up being personally liable to then-unknown creditors after making distributions to the beneficiaries of the trust.

The Massachusetts Uniform Trust Code (“MUTC”), which took effect in 2012, allows creditor claims against revocable trusts; see (a)(3) in Massachusetts General Laws, Chapter 203E, Section 505. The MUTC is otherwise silent about what that means.  The Massachusetts Uniform Probate Code, at Massachusetts General Laws, Chapter 190B, Section 3-803, states in (a) that creditors are out of luck unless they file a lawsuit against an estate within one year of the decedent’s death; and states in (b) that a Trustee is treated the same as the estate’s Personal Representative. Thus, a revocable trust is treated the same as an estate, which has a period for creditor claims of one year after the decedent’s death, and the Trustee of a revocable trust therefore can, without being liable to unknown creditors, safely make distributions twelve months and a day after the settlor’s death. Note, however, that this analysis applies only to normal creditors, not the decedent’s unpaid income tax liabilities, for which the Trustee would remain personally liable.