The Time Required to Terminate an Irrevocable Trust
In most states, trust laws require that an irrevocable trust terminate at the end of 90 years or 21 years after the death of all those living when the trust was set up. For example, if you name your one-year-old son a beneficiary, your trust would have to terminate 21 years after he dies. Such laws prevent perpetual trusts, or trusts that last forever. To terminate an irrevocable trust, the trustee must perform a series of tasks known as administration.
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Notice of Administration
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To settle or terminate a trust, the trustee must serve notice of administration to trust beneficiaries and other interested persons. Notice of administration informs beneficiaries and other interested parties of the date of death of the trust grantor, the file number of the estate and the designation and address of the probate court in which the proceedings are pending. Written notice of administration is also given to the county clerk.
Trust Property
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The time it takes to collect trust property depends on a number of factors. For example, the trustee must hire a private asset search firm to locate undisclosed trust property or perform a search of the grantor's home. Often, bank records, insurance policies and income tax returns may lead to the recovery of trust property. State laws require trustees to protect trust property while it is in their possession.
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Trust Documents
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Trustees must verify that all trust documents are in order and check for originals such as the trust agreement along with restatements and amendments, appraisal reports, property titles and sales contracts. Such documents are needed to convey trust property to beneficiaries in accordance with the trust agreement.
Tax Returns
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The last step in terminating an irrevocable trust involves the filing of tax returns. The trustee must file federal tax returns for the grantor and the trust. If the trust uses a calendar year, the trustee must submit Form 1041 by April 15 of the year following the year of death. If the trust uses a fiscal year, a Form 1041 must be submitted on the 15th day of the fourth month after the end of the fiscal year.
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References
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