Grantors will have much less difficulty dissolving a revocable trust than an irrevocable one.
Published January 12, 2021|5 min read
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How a grantor can dissolve their trust depends on whether it is revocable or irrevocable
To dissolve a revocable trust, you’ll need remove trust assets and create the proper legal document
Dissolving an irrevocable trust is more difficult and requires court approval in some states
You can dissolve a revocable trust by removing assets from the trust, and signing the proper legal document, called a trust dissolution form, which you can find online or hire a lawyer to write for you. You can dissolve an irrevocable trust only under the circumstances set out in your state’s trust law, which commonly include getting permission from all beneficiaries as well as a court. The difficulty of dissolving an irrevocable trust will depend on your state law. An attorney or trustee cannot revoke your trust (unless you have permitted them to do so in the trust agreement).
A grantor might want to revoke their trust if it no longer serves its purpose or if it requires substantial changes that are not worthwhile to make. For example, if your trust beneficiary dies, it may be easier to revoke rather than amend the trust. This article is primarily about how a grantor can revoke their trust; it does not cover how a trustee can close or settle a trust as part of trust administration after the grantor’s death.
By definition, a revocable trust can be dissolved or closed by the grantor (also known as the settlor or trustor). This flexibility is what makes a revocable trust a useful component of an estate plan.
If you’ve created a revocable living trust, these are the steps you can take to dissolve it:
Remove assets from the trust
Get a revocation form
Sign and notarize the revocation
You can create a revocable trust with Policygenius.
If you want to dissolve your trust, you need to get the trust assets back into your name, similar to when you first set up a trust. If you need to defund the trust, you have to go to the bank and change account ownership from your trust's name (“The John Doe revocable living trust”) to your name (John Doe). For other trust assets, you need to change the names on deeds, titles, or other ownership documents. For example, if you put your house in a trust you need to create a new deed retitling the house from the trust’s name to your name and file it with the recording office.
Removing assets from the trust doesn’t change the fact of the trust’s existence. Your trust was established by a trust document, and in order to properly dissolve the trust you need another legal document, called a trust revocation or trust dissolution form. You can find basic trust revocation forms online for free, and these can be all you need if you have a simple trust. If you opened your trust through an online estate planning service, you may want to contact them to ask if they can create a trust revocation form for you. A lawyer can also draw up a revocation of trust form for you, which is likely necessary for more complex trusts.
Related: When should I hire an estate lawyer?
The revocation of trust form should be signed by the grantor as well as notarized so it can pass muster in probate court as a legal document. If your state required witnesses when you created the trust, then you will probably need to have the trust revocation witnessed, too.
Once you've notarized the document, you should inform your trustee and give them a copy so they know their duties are no longer needed. You should also record the trust revocation with the court if you were required by the state to register your trust when you first opened it.
Learn how to notarize a document.
It is not impossible to dissolve an irrevocable trust, but the procedure and difficulty varies by state and their trust law. In some cases, a grantor can dissolve an irrevocable trust by getting consent from all trust beneficiaries . (This could be especially difficult if a beneficiary is under age and state law does not allow someone to consent on their behalf.) The grantor may also need to get court approval , which may not be granted depending on the terms of the trust. The reasons the court might permit you to revoke an irrevocable trust include: the trust’s purposes have been fulfilled or have otherwise become illegal, impossible, impractical to carry out, or uneconomic (the cost of maintaining it exceeds the value of trust property). Couples who created a joint trust may want to dissolve their trust after a divorce.
If you have an irrevocable trust, it’s likely that you hired a legal professional like an estate attorney to help you create it. If you have more questions about trust dissolution, you should consult with them again.
State trust law may also permit a trust beneficiary or trustee to petition the court if they want to dissolve (or amend) the trust. The court may grant approval based on reasons cited above. The petitioner can attempt to do this while the grantor is still alive, or after the grantor’s death. (All trusts become irrevocable after the grantor’s death because they can no longer change it; testamentary trusts, created through a will, are also irrevocable.)
After the grantor’s death, the trustee must properly administer the trust according to the terms set by the grantor in the trust document. That could mean maintaining the trust and making distributions through the years (such as with a spendthrift trust or a special needs trust) or it may mean distributing all the trust assets to their proper beneficiaries at once. As part of trust administration, the trustee must properly settle the trust (notifying creditors, paying taxes, etc.) Once it has completed its purpose and then the trustee can complete the paperwork to dissolve the trust.
Learn more about the distribution of trust assets to beneficiaries.
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