Trusts are legal entities created to hold property. They can be created as revocable trusts, in which case the grantor, or creator of the trusts, retains the right to control them, alter them in any way he sees fit, or terminate them and regain control of the assets. He retains no such rights, however, with irrevocable trusts, unless he first gains the consent of the beneficiaries.
1. Determine whether the trust in question is revocable or irrevocable. You will have to read the language of the trust document itself, which will spell out the procedure for altering or terminating the trust. If the trust is irrevocable, you cannot alter the trust without approval from the beneficiaries.
2. Verify that the conditions of the trust are still extant. Some trusts terminate automatically on a specific date, while others terminate when an event occurs, such as the death of all the beneficiaries. Testamentary trusts, which are established on behalf of a deceased individual, typically terminate when the assets are disposed of according to the probate process.
3. Address any concerns with IRC 2036. This is a section in the Internal Revenue Code that stipulates that assets held in trusts should be included in a decedent's gross estate, if the decedent had enjoyed any benefits from the assets in the trust, or retained control over who would benefit from them. Additionally, the trust must have a bona fide reason to exist, other than to lower your tax bill. In some cases, lawyers draft trust documents incorrectly, and may accidentally leave the corpus of a trust open to estate taxation upon the death of the grantor because they drafted a document that leaves too much control with the grantor.
4. Obtain the consent to terminate the trust of all members of the beneficiary class.
5. Withdraw the assets from the trust. In most cases, if the trust owns only cash, you can do so by writing a check. In other cases, you may have to transfer titles or deeds to property.
6. File a revocation of trust document with the appropriate court. You will need to have an attorney draft the actual document, sign it, and have it notarized. You must also provide a copy of the revocation to all interested parties.
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