Sometimes you need to revisit your previous financial planning decisions. If you recently had a major change in income or assets, which often happens following a divorce, the way in which your property is titled or managed may need a complete overhaul. As part of this adjustment, if you have a living trust that you wish to cancel, you may do so by executing the appropriate revocation paperwork.
Living Trust Overview
A living trust is a trust established during a person's lifetime. Trusts involve holding property for the benefit of another person or persons who are called beneficiaries. The person who manages the property is known as the trustee. It is legal for the creator of the trust, also known as the grantor, to be the sole beneficiary and to also serve as the trustee. Trusts can be used to hold all kinds of property including real estate, boats, stocks and even copyrights.
If you created a living trust and for whatever reason decide that you want to cancel it, your ability to do so will depend greatly on whether the trust is revocable or irrevocable. Irrevocable trusts offer more tax advantages and asset protection than revocable trusts, but the major downside is that they cannot be freely withdrawn. If your trust is irrevocable, you may not be able to withdraw it all, or state law may require additional steps such as obtaining consent from all the beneficiaries. For this reason, you may wish to seek the assistance of an attorney to see what options you have when it comes to irrevocable trusts.
Move Trust Property
Very often the trust document will spell out how you should go about revoking, or canceling, the trust. Typically, before canceling your living trust, it is good practice to first transfer all the property held by the trust into the name of the original owners. This step can be complicated, depending on the nature of the property that is currently in the name of the trust. For instance, if you have real estate or automobiles in the trust's name, you will need to re-title them and have new deeds prepared. .
Read More: How to Set Up a Property Trust
To officially cancel your revocable trust, you will need to either create or obtain a declaration of revocation or similar form, which you can generally obtain from an online legal document provider, your attorney or even the courthouse. The paperwork will note basic information about the trust such as when it was established, as well as contain a simple statement that you are expressly revoking the trust. You should sign this document in the presence of a notary. Once this step is complete, your trust is effectively canceled. As you may need to file the declaration of revocation with the court, call your local courthouse to inquire as to whether this is necessary.
Wayne Thomas earned his J.D. from Penn State University and has been practicing law since 2008. He has experience writing about environmental topics, music and health, as well as legal issues. Since 2011, Thomas has also served as a contributing editor for the "Vermont Environmental Monitor."