How To Terminate A Trust

Terminate A Trust

A trust is an important component of estate planning. A trust generally terminates automatically at the expiration of the term specified or when all purposes have been accomplished. A trust can also be terminated if a settlor or his agent wishes to revoke or amend a trust, unless the terms of the trust expressly state that it is irrevocable. This can be done so physically by destroying the articles of the trust before beneficiaries take or expect from the trust, by submitting proper paper work to the court, or by contacting an attorney and asking them to assist in revoking the trust. Some trusts especially if the settlor is deceased and the trust is solely for the support of the beneficiaries can be terminated by the beneficiaries if all of the beneficiaries consent. Such trusts are known as spendthrift trusts, or trusts with spendthrift clauses. So this can only occur if no material purpose of the trust would be frustrated, and if there is no spendthrift clause, which indicates there is a further trust purpose of the settlor to be served.

Courts Can Terminate A Trust or Preserve A Trust:

Courts also have the ability to modify the trust without the consent of the beneficiaries in order to preserve the interest of the Settlor and the settlers estate planning goals. The court can terminate a trust, save for the interest of a beneficiary who may not agree with the other beneficiaries in destroying the trust, can alter the trust to protect it intent if unanticipated circumstances threaten the purposes of the trust, if the continuation of the trust on existing terms is impracticable or wasteful, or if the value of the trust is insufficient to justify the cost of administration or to achieve the settlors tax objectives. The court can also enforce a trust even if the beneficiaries wish to destroy it. The main reasons a court would do so is if the trust required the property within it be distributed to a beneficiary at a certain age or if it had reasoning for its requirements to protect all beneficiaries.

Trustee Can Terminate A Trust

The settlor, the court, and the beneficiaries (if they all band together) are not the only parties that can terminate a trust. The trustee can also terminate a trust if its in line with the estate planning goals of the settlor. A trustee can terminate an uneconomic trust. An uneconomic trust is when trust property is less than $50k, and the amount is insufficient to justify the cost of administration the trust is considered uneconomic and can be terminated as long as the trustee gives beneficiaries notice. A trustee can also terminate a trust if they can combine several trusts into one or divide one into several. As long as it does not frustrate any purposes of the trusts or infringe on the rights of the beneficiaries.

It is of the upmost importance that when the termination of a trust is imminent or such a path is chosen that you comply with all the laws and regulations of the state of where the trust is administered. Some states have specific requirements about how a trust can be terminated, such as the paperwork required, the types of notices needed to be given to beneficiaries and so forth.

If you would like additional information regarding how to create a trust check out our article on how to do so.

Lexis Nexis, a leading tool for attorneys also has additional information on how to terminate a trust. They have two articles of note. The first is a list of practice notes. The second is a general overview of how to terminate a trust.


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