Termination of a Trust

Question 1

How can you terminate a trust?

Answer 1

By consent, merger, illegality or impossibility, if it becomes an uneconomic trust

Question 2

Can a revocable trust be terminated?

Answer 2

Yes at any time. Under the UTC, by complying with the procedure in the trust, or by any other method manifesting clear and convincing evidence of the settlor’s intent.

Question 3

How do you terminate an irrevocable trust?

Answer 3

Termination by settlor or termination by beneficiaries after settlor’s death.

Question 4

What is termination by settlor?

Answer 4

A settlor may. terminate the trust if all beneficiaries are in existence and all agree.

Question 5

What is termination by beneficiaries after settlor’s death?

Answer 5

If income beneficiaries and remaindermen unanimously consent and there is no material purpose yet to be performed.

Question 6

What happens if the sole trustee becomes the sole beneficiary?

Answer 6

It merges and the trust collapses.

Question 7

Illegality or impossibility

Answer 7

If the trust’s purpose becomes unlawful, contrary to public policy or impossible to achieve, the trust terminates.

Question 8

Uneconomic trust

Answer 8

If the trust property has a total value of less than $50k the trustee may terminate after notifying the beneficiaries if the value of the property does not justify the cost of administration.

Question 9

What is the effect of proper termination of a trust?

Answer 9

If trust beneficiaries properly terminate a trust, trust assets vest in them. After termination, the beneficiaries may themselves distribute trust assets in any manner they choose.