A trust is nothing more than a contract, a legal agreement where one party (the “trustee”) agrees to hold the legal title to assets and manage them for the benefit of others (the “beneficiaries”). Some trusts are “revocable,” which means that the trustmaker (sometimes called the “grantor,” “creator” or “settlor”) can modify or revoke the trust at any time. Other trusts are “irrevocable,” meaning the grantor may not change or terminate the trust except.
The grantor usually serves as the initial trustee of the trust, and when the grantor dies a successor trustee replaces the grantor as trustee to carry out the terms of the trust.
How do you dissolve an irrevocable trust after death?
While, in general, irrevocable trusts cannot be changed, they can be modified or dissolved after the grantor dies in certain situations as authorized by the California Probate Code.
Probate Code §15403
According to Probate Code §15403, if all the beneficiaries agree, they can petition the court to modify or terminate the trust. However, suppose the continuance of the trust is necessary to carry out the material purpose of the trust. In that case, the court cannot be modified or terminated unless the court determines that the reason for modification outweighs the material purposes of the trust.
Probate Code §15409
Under Probate Code §15409, a trustee or beneficiary can request that the court modify or terminate a trust if the current terms would defeat or substantially impair the accomplishment of the trust’s intended purpose due to unforeseen events. For example, if a beneficiary becomes disabled, converting the trust to a Special Needs Trust may be necessary to achieve the trust’s purpose of providing for the beneficiary. This is known as the “change in circumstances” doctrine.
How long can an irrevocable trust remain open after death?
Under California’s “Rule Against Perpetuities,” an interest in an irrevocable trust must vest or terminate either within 21 years after the death of the last potential beneficiary who was alive when the trust was created or within 90 years after the trust was created. If neither of these conditions is achieved, the trust may be void ab initio, or from the start.
This means that most trusts cannot remain open indefinitely after the grantor’s death. However, many trusts call for the distribution of assets and termination of the trust after the grantor’s death.
Can a beneficiary or trustee contest a trust?
Yes, a beneficiary or trustee can contest a trust if they can prove that the trust is not legally valid. Several of the most common reasons a trust can be invalidated are detailed below.
Undue Influence or Duress
If the trust was created or modified through undue influence or duress, it can be invalidated through a trust contest. Undue influence occurs when the grantor is manipulated by a third party to create or modify a trust. The amount of influence exerted over the grantor must be so extreme that the third party’s manipulation overwhelms the grantor’s own free will. Duress is a specific kind of undue influence where the influencer uses direct threats or force to manipulate the grantor.
Fraud or Forgery
Additionally, If a trust instrument was created as the result of fraud, a beneficiary or trustee can contest its validity. Fraud can occur if a third party tricks the grantor into signing the trust, such as by telling them they are signing a different legal document. Another type of fraud that can invalidate a trust is when the document and/or the grantor’s signature is forged.
Lack of Mental Capacity
For a trust to be legally valid, the grantor must have the mental capacity (be “of sound mind”) when the trust is executed. Although the legal standard for sound mind is not demanding, a trust can be successfully contested if the grantor did not have the mental awareness to understand the implications of their actions.
When should I contact a trust litigation attorney?
Dissolving, modifying, or contesting an irrevocable trust can be challenging, so you should always contact a trust litigation attorney before moving forward. An experienced lawyer can review your situation to determine if you have sufficient legal grounds to terminate or invalidate the trust and advise you on the course of action that will be most likely to achieve your goals. Although you are permitted to proceed without an attorney, partnering with a knowledgeable trust litigation lawyer will give you the best chance of success.
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What Would Make a Trust Invalid?
The Trustee’s Guide to Trust Distributions
The Trustee’s Guide to Avoiding Trustee Removal
The Guide to Trustee Succession and Resignation
About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.