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.
Obtain the consent of the trustee and all of the beneficiaries to your termination of the trust. State laws allow for the termination of irrevocable trusts in certain circumstances, as long as the rights of the beneficiaries are protected.
Draw up a simple form entitled "Revocation of Trust." Templates for this form are available online and can be downloaded and filled out, or filled out online and then printed. The document should have in its heading, the legal name of the trust, as well as the name and address of the trustee. The body text should have simple language to the effect that the trust is terminated, and as of what date; the document should also direct the trustee to surrender control of all assets in the trust to yourself or your designated agent.
Date the revocation and sign in the presence of a witness or notary public. The witness or notary may not be the trustee. The effective date of the revocation should be the date you sign, if at all possible. The revocation should be appended to the original trust documents and kept in a safe place.
Provide a copy of the revocation and the original trust documents to the trustee by certified mail, which documents the date they are delivered by the post office. Alternatively, serve the revocation by a private delivery service or process server. To avoid misunderstandings and litigation, it is vital to inform the trustee of your intentions beforehand -- and have proof of the date that the trustee had the revocation in his possession.
An alternative to outright revocation is to set up a new trust, and have your trustee transfer assets from the old trust to the new one. You will need the consent of the beneficiaries of the old trust, whose rights must be preserved in the new one.
If the trust is a part of a will, you can freely amend the trust or terminate it at any time, without the consent of the beneficiaries. These “testamentary” trusts do not provide the advantage of a standard irrevocable trust, which does not have to go through probate.
Terminating an irrevocable trust and distributing its assets to beneficiaries can result in a levy of gift taxes and income taxes on you as well as the beneficiaries. For this reason, it would be wise to consult a tax or estate attorney before making any amendments to an irrevocable trust, or attempting to revoke it.
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