How to Abolish a Family Trust & Get the Money

By David Carnes

A family trust is a revocable or irrevocable trust designed to distribute assets among family members, typically from an older generation to a younger generation. Family trusts are popular, in large part because a properly structured trust can prevent estate taxes from being assessed on the estate of the trust grantor when he dies. The ease with which a trust can be revoked depends largely on whether the trust is revocable or irrevocable.

A family trust is a revocable or irrevocable trust designed to distribute assets among family members, typically from an older generation to a younger generation. Family trusts are popular, in large part because a properly structured trust can prevent estate taxes from being assessed on the estate of the trust grantor when he dies. The ease with which a trust can be revoked depends largely on whether the trust is revocable or irrevocable.

Trust Structure

It takes at least three parties to establish a trust – a grantor who supplies the assets, a beneficiary to eventually receive them, and a trustee to administer them for the benefit of one or more beneficiaries. The trustee is bound by the terms of a written trust instrument the grantor executes when the trust is established. In some cases, the grantor can serve as trustee.

Protect your loved ones by a legally binding will. Make a Will Online Now

Revocability

Trusts can be divided into revocable trusts and irrevocable trusts. A trust is revocable if the grantor is still alive and has the power to revoke it and take back its assets. It is irrevocable if the grantor lacks this power. Normally, the trust instrument will state whether or not the trust is revocable. If the trust instrument is silent on this issue, state law will determine the nature of the trust. As of 2013, in the 25 states that have enacted the Uniform Trust Code, a trust is revocable unless the trust instrument specifically provides otherwise. An irrevocable trust can be revoked only under limited circumstances.

Revoking a Living Trust

Before you revoke a living (revocable) trust, re-title it and any titled trust property in your own name. Although this will require the cooperation of the trustee, in many cases, the grantor and the trustee are the same person. To revoke a revocable trust, you must sign a trust revocation declaration that identifies you and the trust, and states your intention to revoke the trust. Since state law governs the revocation of a trust, check to see if any special requirements – such as statutory wording – apply. Sign the revocation declaration in the presence of a notary public to verify your identity.

Revoking an Irrevocable Trust

State law varies considerably regarding permitted justifications for revoking an irrevocable trust, and most states require a court order. Some states allow you to revoke an irrevocable trust with the consent of the grantor and beneficiaries, in which case trust assets would typically revert to the grantor. If the grantor is already dead, the beneficiaries may petition a court to revoke the trust if all beneficiaries consent and the revocation does not defeat the purpose of the trust. This might happen, for example, if the expenses of administering the trust exceed remaining trust assets. In this case, the court will determine how trust assets are to be allocated among beneficiaries. The court will most likely distribute assets in a manner that most closely effectuates the grantor’s original intent.

Protect your loved ones by a legally binding will. Make a Will Online Now
What Can a Beneficiary Do If the Trustee Refuses to Deal?

References

Related articles

Family Trust Planning Guide

A family trust is an estate planning tool that allows you to appoint a trustee to administer assets on behalf of beneficiaries who are family members: normally, your dependents. Transferring your assets using a family trust offers certain advantages over transferring them through probate. Laws governing family trusts differ somewhat from state to state.

How to Break a Trust in Missouri

In Missouri, trusts are an effective way to safeguard and transfer property. The person establishing the trust, known as the settlor, has wide discretion in determining when and how the trust assets are to be distributed to named individuals, referred to as beneficiaries. In some cases, it becomes desirable for the beneficiaries to "break" the trust and allocate the remaining assets. However, the authority to terminate a trust is governed by Missouri law, which provides only limited grounds for termination.

Removing Real Estate From a Revocable Trust

Revocable trusts are often implemented to avoid probate. A trust's maker, or grantor, retains the power to fully revoke or amend a revocable trust. A trust is governed by its terms and adding or removing real estate from a trust is a power that is usually specifically listed. If a trust lacks this provision, an amendment may be legally required before real estate can be added or removed. Trust requirements may vary, depending on state law.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Living Trusts in Michigan

A trust is a vehicle for holding assets. In the United States, trusts are governed by state law. Although the Michigan ...

How to Terminate a Living Trust

Any trust that you establish during your lifetime is a "living trust." Living trusts can be revocable, which ...

How to Break an Irrevocable Trust

Two types of trusts are possible: a revocable trust and an irrevocable trust. Although the grantor can unilaterally ...

Rights of the Beneficiary of a Family Trust

A family trust is a trust in which the beneficiaries are family relations of the grantor. Since the assets of a ...

Browse by category