How to Get Rid of a Trust

by Beverly Bird

Trusts can be great estate-planning tools -- at least until you want to undo one. When this occurs, you must usually deal with a lot of tedious paperwork or require special permission from the court. In some cases, you must do both. It depends on what type of trust you chose to create and the laws in your particular state. Some jurisdictions are more restrictive than others.

Creating a New Irrevocable Trust

When you create an irrevocable trust, it is technically forever. You transfer ownership of your assets to the trust and name a trustee other than yourself to oversee their management. You no longer have access to them or any control over them. However, it’s still possible to get rid of such a trust under some circumstances and in some states. For example, in New York, your trustee can undo your irrevocable trust for you. This assumes you have a good relationship with him and he's willing to respect your wishes. However, it usually involves creating a whole new trust and moving your assets from the first into the second. You’ve gotten rid of one trust, but your assets are still contained in another. The second trust can involve completely new terms, but your assets are usually still beyond your reach.

Dissolving an Irrevocable Trust

Under some circumstances, and in some states, you might also be able to undo your irrevocable trust entirely. The legislative codes in some states allow you to dissolve an irrevocable trust if you didn’t completely understand the ramifications at the time you created it or you drafted it improperly. However, you’d have to file a legal action with the court, seeking permission and proving either circumstance. If your trust documents contain an error, you’d have to convince the judge that it compromises the assets in some way. In some states, you can also get rid of an irrevocable trust if you have the consent of all its beneficiaries. This method also involves filing a petition with the court for permission, and the petition should include all the beneficiaries’ written consents.

Dissolving a Revocable Trust

With revocable trusts, their creators -- also called grantors -- usually assume the role of trustee. Although ownership transfers to the trust entity just as it does with an irrevocable trust, the grantor continues to have full control of all assets placed within it, if he's the trustee. In this case, court approval is not required to get rid of the trust. The grantor trustee can act on his own authority and dissolve it. However, this involves changing title of all assets from the name of the trust into the name of someone else, usually back into the name of the grantor. If real estate is involved, this requires recording new deeds. When the trust is empty, the grantor can file a revocation with the probate court, alerting everyone concerned that the trust no longer exists.

Dissolving a Testamentary Trust

Testamentary trusts don’t exist until you die. The terms of your last will and testament create them. For example, you might want to roll assets into a trust at the time of your death, rather than give young or irresponsible beneficiaries your assets outright. A testamentary trust holds their bequests for them. Its trustee distributes money or assets to your named beneficiaries as needed, or according to the terms of your will. Testamentary trusts are irrevocable in a sense, because after you die, you can no longer change their terms. However, if you amend your will to eliminate any mention of a testamentary trust, you’ve gotten rid of it. Your bequests will pass to your loved ones directly, through probate.