Termination and Modification of Trusts

Question 1

Trust Termination (typical way)

Answer 1

Terminates according to its trust terms

After termination, the trustee may continue to exercise trust powers for the reasonable time required to wind up the affairs of the trust and to make distributions to the beneficiaries

Question 2

*Judicial Modification or Termination

Answer 2

Upon petition of trustee or beneficiary (not settlor), court can modify or terminate trust if one of the following tests are met:

(i) trust purpose have been fulfilled, or illegal or impossible to fulfill;
(ii) because of unanticipated circumstances, the order will further the purposes of the trust
(iii) the order relates to administrative, non-dispositive terms; or
(iv) order is necessary to acheive settlor’s tax objectives or to qualify a distributee for governmental benefits and is not contrary to settlor’s intent

Question 3

Nonjudicial Termination of Uneconomic Trusts

Answer 3

after giving notice to beneficiaries, the trustee of a trust having a value of less than $50k may terminate the trust without court approval if the trustee determines that the cost of administration does not justify the continuation of the trust

Question 4

Nonjudicial Division or Combination of Trusts

Answer 4

unless expressly prohibited by terms of the trust, a trustee may divide one trust into two trusts or combine two trusts into one without court approval if it does not adversely affect the achievement of trust purposes

Question 5

• when may trustee be removed?

Answer 5

if no controlling provision, any interested party can petition the court to remove a trustee who has violated a term of the trust, violated a duty, or who has become incompetent or incapacitated.

Question 6

*Termination by Revocation

Answer 6

If it is a revocable trust, the settlor can revoke the trust .

Otherwise, the trust cannot be unilaterally revoked by the settlor