Trusts have become a very popular addition to a comprehensive estate plan in recent years because of the wide variety of trusts available and the numerous goals they can help achieve. If you are considering the addition of a trust to your estate plan it helps to have a better understanding of some trust basics before making your final decision. One question that often comes up is “When does a trust end or terminate?”
Types of Trusts in St. Louis
A trust can be a testamentary trust or a living trust. A testamentary trust takes effect when you die while a living trust becomes effective when all the elements of formation have been met and sufficient assets are transferred into the trust to fund the trust. A trust may also be revocable or irrevocable. The type of trust you choose to create will affect how and when the trust terminates. For example, a revocable trust can be terminated by the trustor (person who created the trust) at any time; however, an irrevocable trust cannot be modified or terminated by the trustor once it becomes effective.
Aside from the trustor terminating a trust there are other ways in which a trust commonly terminates, including:
- According to trust terms. The trustor can include trust terms that dictate when and/or how a trust is to terminate.
- When the trustee decides. If the trust terms give the trustee the power to terminate the trust the trustee may do so according to the trust terms.
- Upon final distribution. When the final trust assets are distributed to the beneficiaries the trust will come to an end.
- Consent of beneficiaries. Although the trustor cannot terminate an irrevocable trust the beneficiaries may be able to do so by agreement if ending the trust does not violate the purpose of the trust. Typically, a court must approve this type of termination.
- By a court. A court can terminate a trust for a variety of reasons, such as is it finds that the terms of the trust are illegal or unconscionable.
- State law. Sometimes, the Rule of Perpetuities requires the termination of a trust by requiring that the trust purpose be fulfilled within a specific period of time.
If you believe that a trust might be a beneficial addition to your overall estate plan, consult with your St. Louis estate planning attorney. Given the wide variety of trusts now available most people find that at least one trust fits nicely into their estate plan.