How to Defund a Trust

The settlor, or the creator of a trust, is usually capable of defunding and terminating a trust. Once assets are placed into a trust, the only method to defund the trust, as the settlor, is to revoke the trust pursuant to the terms of the trust document. Occasionally, some trusts are irrevocable, such as a charitable remainder trust. As the settlor, you must also take steps to re-title certain trust assets back into your name.

Instructions

1. Review the trust document to determine whether you, as the settlor of the trust, may revoke the trust. Most trust documents will have a provision that permits the settlor to revoke the trust at any time by a written revocation.

2. Draft a document stating that you, as the settlor of the trust, revoke and terminate the trust, effective immediately. Refer specifically to the trust. Sign and date the document. Provide a copy of the revocation to the trustee and any trust beneficiaries.

3. Prepare a list of all of the assets that are held by the trust. Prepare letters to each institution, such as a bank, that holds the assets. Within the letters, indicate that as the settlor, you have revoked the trust and wish to put the property back in your name. Include a copy of your revocation with the letters.

Tips & Warnings

• If your trust is irrevocable, only the trustee may remove assets from the trust.

• This article does not constitute legal advice. See an attorney.

References

• "Introduction to Estate Planning in a Nutshell"; Robert J. Lynn, et al.; 2004
• "Wills, Trusts and Estates Examples & Explanations"; Gerry W. Beyer; 2007