Revocable trusts are an important estate planning tool for many individuals. They allow for the management of assets during a person’s lifetime and the distribution of assets after their death.
However, circumstances can arise where the trust must be revoked before the person dies.
Let’s explore who can revoke a trust, the steps involved in revocable trust termination, and how a Cinnaminson trust lawyer can help.
A trust is a legal arrangement in which a person or entity holds property or assets for the benefit of another person or group.
Here are some helpful terms to know:
Trusts can be used for various purposes, such as estate planning, asset protection, and charitable giving. Trusts can also be revocable or irrevocable, determining whether the trust can be changed or terminated after it is created.
Revocable and irrevocable trusts are two types of trusts used in estate planning. The main difference between trusts is that a revocable trust can be changed or terminated by the grantor during their lifetime, whereas an irrevocable trust cannot be changed or terminated without the permission of the beneficiaries.
Revocable trusts are also known as living trusts, as they are created during the grantor’s lifetime and are often used to manage assets during incapacity and distribute assets after death. Since the grantor retains control over the trust assets, they can modify or revoke the trust as their circumstances change.
Irrevocable trusts, on the other hand, are often used for tax planning, asset protection, and charitable giving. Once the trust is created, the grantor cannot change or revoke it without the permission of the beneficiaries. This means that the assets transferred to the trust are no longer considered part of the grantor’s estate and are protected from creditors and estate taxes.
There are several reasons someone may want to terminate a revocable trust.
Some of these reasons include:
The grantor is the only person who can terminate a revocable trust during their lifetime. Since the grantor retains control over the trust assets, they retain sole control over the modification or termination of the trust at any time.
Once the grantor passes away, the trust becomes irrevocable, and the terms of the trust cannot be changed.
If the grantor decides to terminate the revocable trust, several steps must be followed:
If a revocable trust’s grantor becomes incapacitated, the ability to terminate the trust depends on the terms of the original trust agreement. If the trust agreement allows a successor trustee to step in if the grantor becomes incapacitated, the successor trustee may have the power to terminate the trust.
However, if the trust agreement does not provide for a successor trustee, the grantor may be unable to terminate the trust if they become incapacitated.
Revocable trusts can be an effective part of your estate planning checklist, but circumstances may arise where the trust needs to be terminated. The grantor is the only person who can terminate a revocable trust during their lifetime. If the grantor decides to terminate the trust, they must follow certain steps to do so effectively and legally.
If you or someone you know needs help navigating the waters of revocable trust termination, The Simone Law Firm in Cinnaminson, NJ, can help. We’ll review your trust document and determine your situation’s best course of action.
Contact us today to get started.