How to Repudiate a Trust

By John Cromwell

When a trust is repudiated, the legal entity that holds the trust property is terminated so that others can gain access to the assets. A trust is an agreement created by a person who donates property for select individuals’ benefit. The property is given to a trustee, who manages the property and distributes it to the beneficiaries subject to terms established by the trust’s creator. There are two types of trusts. A living trust is created by a donor while he is alive and a testamentary trust is created by a donor’s will. Trusts are subject to state law, so regulations regarding how the trust can be terminated may vary. Consult state law to determine the exact steps you need to take to repudiate a trust.

Living Trust

Step 1

Review the trust agreement. The trust agreement defines the terms of the trust. It will establish whether the trust is revocable or irrevocable. It may also provide a process for terminating the trust. If the agreement does provide a means to terminate the trust, follow those steps.

Step 2

Convince the trust creator to help you repudiate the revocable trust. If the trust agreement does not provide a means to terminate, having the permission of the trust creator to terminate the trust is an important first step for repudiating a trust in many states.

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Step 3

Instruct the trust creator to terminate the revocable trust. A revocable trust allows the trust creator to change the terms of the trust or terminate it outright at any time. If you are able to convince the trust creator to terminate the trust, he can pull the property out and transfer it to you immediately.

Step 4

If a trust is irrevocable, get all the other beneficiaries to agree to terminate it. In many states, an irrevocable trust can be terminated if the creator of the trust and all of the beneficiaries agree. If they all do, get them to sign a document stating they wish to terminate the trust.

Step 5

Repudiate an irrevocable trust by appealing to a court. In many states, a court will terminate a trust if the value of the property in the trust does not justify the costs of administering it. A court may also terminate a trust in many states if it finds that circumstances have changed to such a degree that the purpose of the trust would be better served if the trust was terminated. File a petition with the appropriate court asking for the termination of the trust based on one of those two grounds. To file the petition, you must be a trustee or a beneficiary.

Testamentary Trust

Step 1

Review the will. A testamentary trust is created by a donor’s will. The will should establish the terms of the trust and identify the beneficiaries.

Step 2

Convince the beneficiaries to terminate the trust. In many states, you will need all of the beneficiaries' support to terminate the trust.

Step 3

File a petition with the court to terminate the trust. In most states, you and all the other beneficiaries must file a petition with the appropriate court requesting the trust be terminated. The petition must argue that terminating the trust would not be inconsistent with the trust’s purpose.

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How to Dissolve Inheritance Trust
 

References

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What Can Invalidate a Living Trust?

With a living trust, an individual - known as the "settlor" - typically gives up control of property placed in the trust. Although trust law is largely state-specific, parties with an interest in a trust or its property may ask a court to invalidate all or part of the trust on the grounds there was some impropriety in its creation.

Irrevocable Family Trust Laws in Massachusetts

An irrevocable family trust can be effective estate planning tool. When an individual establishes this type of trust, he appoints an individual, known as a trustee, to oversee the administration of the trust. In Massachusetts, specific rules apply to the trustee. State law also sets forth the limited circumstances for the modification or termination of the trust. Understanding the state laws that apply to irrevocable family trusts will help ensure the proper distribution of property held in the trust.

How to Terminate an Irrevocable Trust

With a trust, you transfer assets to a legal entity set up to shelter your estate from the probate process. A trust allows you to control who will inherit your property after your death and give instructions to a trustee on how to manage that property. Although an irrevocable trust, in theory, cannot be changed or cancelled, there are ways to close down the trust and, if you wish, transfer assets to a new one. If the trust no longer serves the purpose for which it was set up, you may revoke it or draw up amendments that substantially change its terms. In most cases, this process will be subject to review by the courts to ensure that the beneficiaries retain the rights they were granted in the original trust.

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