How to Terminate a Trust in Texas
When a trust statement is drafted, it is almost impossible to take all possible life scenarios into consideration. If something has slipped through the cracks and you realize your family trust fails to address certain issues, Keith Morris & Stacy Kelly, Attorneys at Law may be able to help you modify or terminate it.
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Terminating a Revocable Trust
Trusts that were created during the settlor’s life can be either “revocable” or “irrevocable.” A revocable trust can be ended by the settlor at any time.
Revocable trusts are not subject to federal gift tax because the donor reserves himself/herself the right to terminate the trust at any time, the gift is still under his/her control and not considered “completed.”
Terminating an Irrevocable Trust
Even irrevocable trusts may be terminated in certain circumstances. According to Section 112.054(a) of the Uniform Trust Code, trustees or beneficiaries have the right to file a suit for modification or termination of their trust.
A modification of the trust may be deemed necessary for the following reasons:
- Removal of corporate trustees
- Appointment or removal of trustees outside of court
- Drafting mistakes in the trust agreement
- Change in federal or state tax law
- Change of situs of governing law
- Split a large trust into separate trusts
- Combine smaller trusts into one
- Modify rights and authority for beneficiaries
- Add special protection for beneficiaries due to unforeseen personal or financial circumstances
- Extend termination date for tax or asset protection purposes
- Remove grantor status or convert into grantor trust
- Improve poorly administered life insurance trust
- Add special needs provisions
Irrevocable trusts are typically created outside of the testator’s estate and are subject to gift tax laws. This does not apply to life insurance trusts. The amount of tax impact an irrevocable trust has depends on its terms and whether the trust ends at the person’s death or will be carried on by their heirs.
All income generated by an irrevocable trust is subject to income tax. The income will be distributed among the beneficiaries and will be deducted from the trust’s taxable income.
To revoke and/or terminate an irrevocable trust, the settlor and all beneficiaries must express consent. If one party seeks modification of the trust against the interest of another party, the petition will need to be brought before a court to decide.
Under the doctrine of merger, a trust is considered terminated as soon as one party gains possession of the legal and equitable title to the trust property. A trust is also terminated once all money therein has been spent by the trustees.
A testamentary trust can only be terminated if the material purpose no longer exists. If for instance, the trust was set up to pay for the children’s education, it cannot be terminated until the children have received said education.
Get Help Terminating A Trust In Texas
Fiduciary laws regarding trusts in Texas are complex matters that should not be taken lightly. If you need help assessing and evaluating a trust for termination, we recommend contacting an experienced trust attorney. Keith Morris is here to help.
Contact Keith Morris today at (713) 636-5339 in Houston and (817) 442-2048 in Fort Worth to schedule a free consultation to discuss your legal rights in terminating a trust in Texas.
Success that Speaks for Itself
Case Results
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Dispute Resolved Estate Administration & Division of Assets
Resolved highly contentious ongoing dispute over father’s estate and division of assets between son and daughter.
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Dispute Resolved Estate Administration Case
Successfully resolved case between two siblings fighting over cash and personal property of their father.
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Hearing Won Evidentiary Hearing
Won lengthy evidentiary hearing to prove client was not in contempt of court to avoid sanction or jail time.
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Case Won Guardianship Case
Won trial to exclude wife to serve as guardian of gentleman she married that was at least twice her age.
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Six-Figure Settlement Reached Multi-Million Dollar Estate Case
Obtained six-figure settlement after jury was seated for adopted child in multi-million dollar estate case after adoption was disputed.
Why Choose Attorneys Keith Morris & Stacy Kelly?
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Extensive Experience
With over 40+ years of combined legal experience, Keith Morris & Stacy Kelly devoted their efforts to sharpening their skills in probate, trust, and estate planning and litigation.
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Keith Morris & Stacy Kelly are proud to be the litigators that takes on the most complicated and difficult cases to court and getting their clients optimal results.
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Free ConsultationsYour first free case evaluation with us can be done through video conference, phone call, or an in-person meeting.
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If you call our firm, we will personally pick up the phone and handle your case with the attention it deserves.
Contact the firm today to discuss your case during a free consultation and explore your options.