Legal Precedents for Dissolving an Irrevocable Trust
Dissolving or terminating an irrevocable trust is a complicated legal process, but it is possible. The manner in which a trust is dissolved depends on the size of the trust, when it was created and for what purpose, state trust statutes and whether all of the interested parties in the trust agree to its termination.
Other People Are Reading
-
Small and Uneconomical Trusts
-
Most state statutes contain provisions to terminate irrevocable trusts that are defined as being "small." This dollar amount varies by state, but in order to meet the criteria of being a small trust, assets typically range from $50,000 to $100,000. Many irrevocable trust agreements contain provisions in the language of the agreement that also will allow dissolution of trusts that are determined to be uneconomical. The terms of termination usually pay a life-income beneficiary a dollar amount based on life expectancy under actuarial tables, with the remainder amounts split equally among the trust remaindermen.
Larger Trusts
-
Larger irrevocable trusts can possibly dissolve if all interested parties agree, but a court action is required along with a valid reason for trust termination. A judge generally will not terminate an irrevocable trust without good reason, since the grantor's intent was to have a trust. Legal precedents for irrevocable trust termination are in common law, and an order of termination usually occurs only when the trust has accomplished its purpose or can no longer fulfill its purpose. Common law does hold that an irrevocable trust cannot terminate prior to a specified term expressed in the trust language.
-
Common Law
-
Each jurisdiction relies on local common law first when looking for legal precedents but will expand to other jurisdictions for guidance. Specific case law below the appellate is available for research, but the research sites are subscription sites, such as LexisNexis or Westlaw Court Express. Case law such as Byers v. Beddow, as discussed in "Florida Law of Trusts," affirm the generally held court consensus that trusts do not terminate early for reasons that may seem silly to the general public. In this case, a grantor's daughter attempted to terminate the irrevocable trust by stating she could never have any children that would ultimately be entitled to the trust principal. The Florida Supreme Court upheld the long-standing practice that an adult female, regardless of age, can supposedly have children as long as she lives. Medical testimony that the daughter was unable to have children was inadmissible to the court.
Cases to Explore
-
For trust beneficiaries willing to pay the fee for a subscription to review case law, a few cases for review are Pentland v. Pentland, 113 So 2nd 872 (Fla 2d DCA 1959); Featherston v. Tompkins, 339 So 2nd 306 (Fla 3rd DCA 1976); Matter of Ricks, 10 NY 2nd 231 (1961) and White v. Bourne, 151 Fla 12, 9 So 2nd (1942). The leading case precedent in matters of trust termination is quite old, and is Claflin v. Clafin 149 Mass. 19,3 LRA 370, 20N E 454 (1889). This case holds that trust termination cannot occur early if such dissolution violates the intent of the grantor unless the grantor agrees to the termination.
Seek Advice
-
Irrevocable trust termination is tricky legal work, and a beneficiary attempting to terminate an irrevocable trust early would be prudent to seek the advice of a trust lawyer who is an experienced litigator. Having a trust litigator is more advantageous than a trust lawyer who does not litigate and only practices trust and estate planning and drafting, as the litigator will have the court experience necessary to fully advise the beneficiary of legal options available.
-
