A revocable trust is a trust that the grantor can amend or revoke at any time. Once the grantor dies, however, the trust automatically becomes irrevocable and can't be changed. Its assets do not go through probate -- the trustee continues to administer the trust as before in accordance with the terms of the trust deed. It is possible under certain circumstances, however, to terminate a trust even after the grantor dies. Once the trust is terminated, its assets will be distributed in accordance with the terms of a court order.
1. Consult with the trustee and have him check the terms of the trust deed. The trust deed may contain an escape clause that allows the trust to be terminated if certain conditions are met. For example, it can allow the trustee to unilaterally terminate the trust after the grantor dies.
2. Speak with the beneficiaries and obtain their written consent to the termination of the trust. This might not be possible in some states if any of the beneficiaries are unnamed. "Gordon's first-born son", for example, is an unnamed beneficiary if Gordon has no son at the time you seek to terminate the trust. Because someone who doesn't exist can't consent to the termination of the trust, some states might not allow the trust to be terminated on the basis of beneficiary consent. If any of the beneficiaries is a minor, you might have to wait until he reaches 18 to obtain his consent.
3. Draft a petition to the district court asking the judge to issue an order terminating the trust and distributing its assets to beneficiaries. If you can't get the consent of all beneficiaries, you might be able to demonstrate that, due to unforeseen circumstances, the trust can no longer achieve the grantor's original intentions. Include a statement describing how the beneficiaries would like the trust assets to be distributed.
4. Attend the court hearing together with all beneficiaries. Be prepared to explain to the judge how the interests of justice would be served by the termination of the trust. If your petition is successful, the judge will issue a written order terminating the trust.
5. Take the court order to the trustee and have him dispose of all trust assets in accordance with the terms of the order. This may require using the court order to change trust assets into the names of individual beneficiaries. It may also require liquidating trust assets by, for example, selling a house, and then distributing the proceeds of the sale to the beneficiaries.
- If the grantor acquires assets in his own name and dies before he can transfer it to the name of the trust, the assets will have to go through probate court. This could cause lengthy delays in distribution.
- The laws of different states vary concerning the procedure and grounds for terminating a trust. Some states require the consent of all beneficiaries, others limit the termination of a trust to certain specified grounds, and still others require both consent and independent grounds.
Items you will need
- Trust deed
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