How can you terminate a trust in California?
At some point during trust administration, it will be necessary for the trustee to finish up the process and then terminate the trust. In order to terminate a trust in California, it’s necessary to pay particular attention to California probate laws and trust laws as well as taking tax matters into consideration.
As the trustee, your responsibilities are fairly straightforward: gather the trust property, determine its value, and then distribute it to the beneficiaries named in the trust as quickly as possible. There are usually no long-term duties involved except in the case of, for example, a special needs trust which can last for many years.
Once you’ve completed your duties as laid out in the trust document, you’re ready to terminate the trust. There are a series of steps that, in general, you need to take during the trust termination process in order to protect yourself and the trust from any potential liability.
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Following the steps
The first step to take in closing a trust is to thoroughly review the trust documents to determine whether it contains any provisions with respect to closing the trust. If so, you need to comply with any and all terms and provisions. Send notice in writing to all of the trust beneficiaries and any other interested parties providing them with the effective date of the trust dissolution.
Obtain signed documents from the beneficiaries acknowledging their receipt of trust distributions. Prepare trust dissolution documents that include the name of the trust, the date when it was created, the names of the grantors and settlors, and the date of dissolution. If you’re terminating the trust early, you must obtain consent from all of the beneficiaries.
In general, trusts are intended to be administered without court intervention. However, there are cases in which court approval is needed. If you’re terminating the trust because the principal is so low that maintaining the trust administration is no longer reasonable, you’ll need to file a petition with the probate court for termination.
Also, if the administration of the trust has been court-supervised, or if there has been any kind of litigation over the trust, you may be required to petition the court for approval before closing it.
You should consult with a San Diego probate court lawyer for legal advice and assistance when it comes to concluding the affairs of the trust in order to properly terminate the trust.
Getting legal guidance along the way
In addition to natural trust termination, there are reasons that may make terminating a trust early a necessity including:
- Diminished value of the trust
- Death or other changes in circumstances
- Disclaimer or relinquishment of a beneficiary
- Mutual agreement of the beneficiaries
- Lost original trust documents
For these and other reasons, trustees should seek legal guidance of an attorney that is experienced in trust termination. The Law Office of David W. Foley, San Diego trust attorney, offers clients expert trust administration services and can guide you through the process of terminating a trust. Call our office to schedule a consultation.