How Do You Dissolve A Trust in Phoenix, Arizona?

Trusts are a central feature of many estate plans. If your estate plan includes a trust, it is important to understand how a trust can be dissolved in Phoenix, Arizona.

How Do You Dissolve A Trust in Phoenix, Arizona?

Dissolving a Revocable Living Trust During Your Lifetime in Phoenix

A revocable or living trust is a flexible estate planning instrument that the creator (“grantor”) can dissolve at any time and for any reason during his or her lifetime. There are three main reasons why a grantor would want to dissolve a revocable trust:

  1. A single grantor gets married and wants to create a joint trust;
  2. A married couple with a joint trust gets divorced; and
  3. There is a significant life change, and it does not make sense to amend the trust. For example, if a major beneficiary dies or falls out of favor with the grantor.

Once you decide that you want the trust to end, you must take three primary steps to dissolve it.

  1. Review the Trust Agreement. First, you must find out if the trust contains any specific requirements. For example, the trust may require you to notify trustees or beneficiaries.
  2. Defund the Trust. Before you dissolve a living trust, you must transfer all the assets out of the trust. This process might include executing documents to transfer ownership of all real estate and personal property from the trust back into your name.
  3. Complete a Written Revocation. The final step is to create a written document revoking the trust. This document must include a statement clearly indicating that you intend to revoke the trust. You should sign the revocation before a notary public, and deliver copies of the revocation to the trustees and anyone else aware of the trust. This could include financial institutions and beneficiaries. If the trust was registered with the court, the revocation should also be filed with the court. It is important to keep the document in a safe place with the original trust and your other estate planning documents.

Dissolving a Revocable Living Trust After Administration in Phoenix

Dissolving a trust as a trustee after administration is a fairly straightforward process in Phoenix. The trust should be closed only after you have distributed the trust property to the people entitled to it. The trustee is allowed to keep a reasonable reserve to pay debts, expenses, and taxes. It is not necessary to sign or file any specific document to dissolve the trust. It merely ceases to exist when you have distributed all the trust property.

If the trust accumulated more than $600 in taxes, you will need to file a tax return. You should also file a final accounting. The final accounting should include a clear statement of what the trust earned (if anything) and how you distributed the trust property. You should send the final accounting to all the trust beneficiaries.

How to Dissolve an Irrevocable Trust in Phoenix

By its name, you might assume that irrevocable trusts can never be dissolved or revoked. But this is not always the case. There are certain circumstances where Arizona law allows irrevocable trusts to be dissolved. However, unlike revocable trusts, the grantor cannot decide to dissolve the trust unilaterally.

  1. Modification by Consent

An irrevocable trust can be dissolved if all the beneficiaries agree and the court determines that the continuance is not necessary to achieve any material purpose of the trust. Court approval is required; the beneficiaries cannot decide to dissolve the trust without court involvement. When the trust is terminated, the property is distributed as agreed upon by the beneficiaries.

  1. Judicial Modification

A trustee or another interested party can petition the court to dissolve the trust if there are unanticipated changes or an inability to administer the trust. A trust cannot be administered if there isn’t enough property in the trust to continue the operation.

  1. Trusts Will Value of $100,000 or Less

Upon notice to all qualified beneficiaries, a trustee can terminate an irrevocable trust with a value of less than $100,000 provided that the assets are distributed in a manner consistent with the purposes of the trust.

Your Phoenix Estate Planning Attorney

If you are interested in creating or updating your estate plan, you should consult with an experienced estate planning attorney who understands Arizona’s unique laws and regulations. Nicole Pavlik has successfully helped many Phoenix residents navigate the estate planning process and is ready to offer you the advice you need. Call Nicole Pavlik Law Firm today at 602-635-6176 to schedule a consultation.

 

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