Find Out More About This Estate Planning Tool
Although once thought of as something reserved for the very wealthy, trusts have become a popular estate planning tool for people from a variety of financial backgrounds. There are numerous reasons for this, including the variety of trusts available as well as an increased public awareness about the importance of planning for the expense of long-term care.
Despite their growing popularity, trusts continue to be one of the lesser known estate planning products. Commonly, people wonder just how a trust ends – or, in legal terminology, terminates. If you are considering a trust for you or your family, familiarizing yourself with common trust terms can help you make an informed decision about whether a trust is right for you.
Types of Trusts
Generally, trusts can be broken down into two groups: testamentary trusts and living trusts. Testamentary trusts refer to trusts that only become effective upon your death. By contrast, a living trust goes into effect during your lifetime. As long as the living trust is properly drafted and funded, it is effective and fully functional.
Additionally, your estate planning lawyer will also tell you that living trusts can also be revocable or irrevocable. Which type of living trust you choose will determine when it terminates and who has authority to terminate it. The person who makes a revocable trust, known as a maker, grantor, or settlor, has the authority to terminate or revoke it at any time. In an irrevocable trust, however, termination is governed by the terms of the trust, and the trust’s maker is not permitted to retain the authority to terminate or revoke it.
Other Ways to Terminate a Trust
Trusts can also be terminated in a variety of other ways, including:
After Final Distribution: Once the trust’s final assets have been distributed to the trust beneficiaries, the trust terminates.
Per the Trust’s Terms: The trust’s terms control every aspect of the trust, including how, when, and by whom it can be terminated.
Per Consent of the Beneficiaries: In some cases, an irrevocable trust’s beneficiaries – typically with the court’s consent – can choose to terminate the trust.
By Court Order: In somewhat rare cases, a court will order the termination of a trust because it is unconscionable or violates state law.
Springfield, Missouri Estate Planning Attorneys
This website has been prepared by The Law Office of Randy L. Smith, LLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.