If you are looking for a way to ensure your assets will be properly managed in the event you become incapacitated, a trust is a very good resource. A Family Wealth Trust, for example, can be used for asset protection and for safeguarding your family’s legacy. They can be useful in managing a younger heir’s access to assets, as well as providing long-term oversight and management of investments. Like most contracts or legal agreements, the terms of the trust will eventually come to an end. When does a trust end? It depends on the type of trust, and the specific terms included in the document.
What is a trust?
A trust is a special arrangement between the property owner and the trustee. The owner or “grantor” transfers property to a trust account and designates a trustee to manage that property for the benefit of another, referred to as the beneficiary. Instructions for managing and using the property are provided in the written document or “trust instrument.”
How does a trust end?
There are many different situations that lead to termination of a trust. Most trust documents specify the distribution of all of the trust property to the beneficiary, as a termination event. Termination could occur on a specific date or when a certain event occurs, such as upon the beneficiary’s graduation from college.
The trust document can provide specific instructions for termination, in addition to those related to distribution of the trust property. So a trustee can terminate the trust, according to the termination provisions, or in his or her own discretion, if authorized by the trust language.
Termination by the courts
A trust can also be terminated by a court if it is determined that the trust was created under fraud, duress, coercion or undue influence of some type. Likewise, if a court determines that the purpose of the trust has become illegal, the trust will be terminated. An irrevocable trust can only be terminated when all beneficiaries consent, and that termination is not contrary to the general purpose of the trust. Termination of an irrevocable trust usually requires filing a petition with the court.
Revocation of a trust
If you want to make changes to a will, it is easy to revoke the will entirely and draft a new one. It is a little more complicated with a living trust however, because the property in the trust has already been transferred. You could revoke the trust, draft a new one and transfer the property again. If the expense and trouble of doing this is substantial, you may consider restating the living trust document.
What happens when the trust ends?
If there is property remaining in the trust after it is terminated, the trustee and the beneficiary must work together to determine how to distribute that remaining property. Instructions for such a situation can be included in the trust instrument by the grantor.
If you have questions regarding a trust, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online, or by calling us at (479) 443-0062.