Dissolving A Irrevocable Trust In Texas
Trusts are legal entities that people use to manage some or all of their property or assets. You have to appoint a trustee when you create a trust because the trustee will be the one in charge of distributing your assets to beneficiaries according to trust terms. There are trusts that you can fund when you are alive and trusts that are funded after your death.
The two types of trusts that you can create are revocable and irrevocable trusts. Generally, revocable trusts become irrevocable trusts following the death of the person that created the trust (trustor).
Irrevocable trusts are trusts that cannot be modified, revoked or amended with only a few exceptions. These trusts avoid probate, which is the legal process that Wills have to go through before the decedent’s assets are passed to heirs. Since it does not go to probate, the way assets in the trust are divided remains private.
Lawsuits are also unlikely because once you transfer your assets to an irrevocable trust, you cannot take them back. That means that your creditors or other entities cannot access them either. You can choose the beneficiaries who will benefit from the assets you place in the trust, and can decide the date when the assets will be transferred to beneficiaries after your death. Trusts also help you keep your Medicaid and tax advantages.
Dissolving Irrevocable trusts
Situations where an irrevocable trust can be dissolved are very rare. These trusts can be dissolved in two ways:
- Judicial modification: Either a trustee or beneficiary of the trust can petition a court to dissolve a trust if the trustor is deceased or the trustor refuses to consent to modification of the trust. The court may modify the trust if it has fulfilled its purpose or the trusts purpose is impractical to fulfill and more.
- Modification by consent: the trustor and beneficiaries can reach an agreement to modify the trust or revoke it. All parties involved must agree to the modification or revocation. Without unanimous consent or if the trustor is deceased, this option is unavailable.
Examples Of Irrevocable Trusts
Below are some of the forms of irrevocable trusts:
- Testamentary trust: Are considered irrevocable because they are created and funded only after the trustor is dead. Details about how they should be formed and funded are in the Will of the deceased.
- Irrevocable Living trust: A trust that you create during your lifetime. You can transfer your wealth, protect assets, or reduce taxes using this trust.
- Charitable trust: This trust is created for the purpose of benefiting a charitable entity.
- Irrevocable Life Insurance Trust: You can create this type of trust to receive your death benefits. This way the value of your death benefits is not added to your estate for tax purposes.
Should You Create An Irrevocable Trust
Only a skilled estate planning lawyer can help you make a decision about whether you can benefit from an irrevocable trust or not. Your lawyer can explain in detail the advantages and disadvantages of an irrevocable trust.