This article provides instructions on how to close a trust. Before closing or dissolving a trust, the trustee must complete all steps in the trust administration process. This includes paying all financial obligations, distributing trust property to beneficiaries, filing final tax returns, and providing a final Trust Accounting. In order for a trust to end, all debts must be paid and all trust property must be distributed.
After the trustee has completed all actions required to administer a trust and there are no remaining assets in the trust except sufficient funds to pay any final expenses, the trustee may close the trust. The first step in determining how to close a trust is to review the trust document thoroughly. If the trust document contains any provisions regarding closing the trust, the trustee should comply with those provisions.The remaining steps to close a trust are:1.Send written notice to the beneficiaries and any other interested parties indicating the trust is being dissolved as of a certain date and the trustee is resigning at that time. For a sample form letter and instructions on how to complete this step in trust administration, go to
Trust Distribution Letter.If you have not already obtained signed documents from the beneficiaries acknowledging they received their distributions from the trust, it is a good idea to do so before closing the trust. If you overlooked any steps required to settle the trust, complete those actions before you end the trust. If you are not an expert in estate planning and trust administration, it is likely you overlooked important details. To complete your trustee duties, refer to forms for trustees for instructions on how to settle a trust.2. Prepare a written document indicating the trust will be closed or dissolved on a certain date. Include pertinent information, such as the full legal name of the trust, the date the trust was created, the place the trust agreement was executed, and the names of the grantors or settlors. Sign the Trust Dissolution Form as trustee. Store this document in a secure location with other trust records, such as the original trust documents. If questions arise at a later date regarding the status of the trust, this document will serve as a written record that the trust was dissolved.The steps necessary to dissolve a trust vary based on several factors. In general, trusts are intended to be administered without court intervention. However, if administration of the trust has been court-supervised or there has been any type of litigation over the trust, you may be required to petition the court for approval before you can close the trust. Also, depending on the type of trust and which
apply, court approval may be required before closing the trust.Consult an attorney to confirm you can close the trust in compliance with applicable state laws. For a list of state trust codes and statutes, go to
Trust Law. If the settlor, beneficiaries or any interested persons object to the trust being closed or there are any unresolved disputes regarding administration of the trust, get legal advice before dissolving the trust. Note: These instructions apply to circumstances in which the material purposes of the trust have been fulfilled, the intended duration of the trust has expired, and distributions have been made according to the terms of the trust instrument. If you want to terminate the trust early, refer to the instructions on how to terminate a trust.
Closing a Trust Account
Many first time trustees make the mistake of assuming closing the trust account is sufficient to end the trust. This is not the case. Although all accounts titled in the name of the trust should be closed and all living trust property should be distributed or transferred out of the trust prior to the trust's end date, closing a trust account is only one part of the process of ending a trust.To protect against liability, the trustee should carefully document all steps taken to close the trust and store trust records securely after administration. For more detailed information on requirements trustees must follow, go to our page
Closing a Living Trust
If you are trying to determine how to close a living trust after administration of a decedent's estate, you may be wondering if you completed all the tasks a successor trustee is required to perform. The best way to avoid skipping an important step is to review a comprehensive checklist for trustees. You can review and print the Pennyborn.com successor trustee checklist form to see the steps typically required to administer and close a living trust. This is also a good checklist to review if you are ending a living trust during the grantor's lifetime.
How to Revoke a Living Trust
If you made a revocable living trust as part of your estate plan but your objectives or circumstances have changed, you may wish to remove your living trust from your estate plan. Unfortunately, this is not as easy as simply tearing up your living trust documents. For information on the steps involved, see how to revoke a living trust. If you want to keep your revocable living trust intact, but need to remove or replace a beneficiary of the trust, see change trust beneficiary.
Have you completed all the steps necessary to properly close the trust? While you may believe it is time to end the trust, missing even one step in the process can result in costly legal problems months or years from now.If you are attempting to end a trust without an attorney, the best precaution you can take is to read every trustee checklist and manual for trustees you can find to ensure nothing is overlooked. Before finalizing the paperwork to close the trust, take another minute and review our Trustee Checklist for anything you may have missed. Consult an attorney to verify that you have fulfilled your duties as trustee.
Before Closing a Trust
Before a trustee completes the steps to end a trust, he or she should review all the required steps of trust administration to ensure nothing has been overlooked. A key consideration for trustees is liability. Have you taken the necessary steps to reduce or limit your liability as trustee? One action trustees sometimes take is to have beneficiaries of the trust sign consents, waivers or releases. An example is a Waiver of Accounting Form. An attorney can advise you whether it is prudent to have the beneficiaries sign these types of forms in your particular circumstances.For an overview of how releases are sometimes used during trust administration and why a fiduciary may want this type of form signed before closing the trust, see
Trust Beneficiary Release.
Free Trust Administration Guide
For a comprehensive overview of the steps involved in administering a living trust, review our free online trust administration guide on our
administer a trust page. Our trust administration guide includes information on trust accounting, tax returns due for the deceased settlor or grantor, estate taxes, inheritance taxes, trust transfer deeds, and debts of the decedent.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated March 22, 2020.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
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