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A beneficiary can devise his or her interest in an existing trust, and if the trust terms permit the distribution to the beneficiary, then that would also permit distribution to the third party.
The trust would continue to exist, however, until such time as the remaining beneficiary's interest was distributed, and the executor would remain as executor.
"Trust" property can't be removed to someone else's estate. The beneficiary's interest in the property can be distributed, if the trust instrument permits the distribution, and the future vested right to any income and/or principal can be granted to another person's estate.
Example: Trust contains a residential condo. Trust states that three beneficiaries are tenants in common and entitled to distribution. Trustee can grant a deed to each beneficiary for their respective interests, and that deed can be transferred to a third party.
Third party's interest is not clear, because either the trust still has an interest for the other beneficiary which hasn't be distributed, or the other beneficiary has been issued a deed for his/her interest. If the trustee failed to issue the deed to all three tenants in common, then the third tenant in common could sue to force the transfer. Note, that if the third party were to move into the condo and assert sole ownership for a long enough time, that party could obtain the entire property by "adverse possession."
It seems to me that the resolution of this problem is to demand equal distribution of the 1/3rd interest in the trust, and if the exector refuses, then sue to force the distribution.
And, if the trust insrument did not provide for any distribution yet, then sue the third party to return the property interests to the trust, because the beneficiary had no right to the property and the executor no authority to distribute it. You could also sue the executor for breach of trust.
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