Can You Terminate an Irrevocable Trust in Florida?
Contrary to popular belief, even an irrevocable trust can be terminated. It may be possible to terminate a trust if the trust is not serving the interests of the beneficiaries or if the trust purpose has been frustrated or impracticable.
Terminating an irrevocable trust in Florida can be complicated, which is why it is best to consult with an St. Petersburg estate planning attorney to learn your options.
Judicial vs. Non-Judicial Termination of Trusts in Florida
Section 736.0412, Florida Statutes, provides that an irrevocable trust can be terminated without court approval if the trustee and all “qualified beneficiaries” unanimously agree to do so. The process is referred to as “nonjudicial termination” of trust, and is permissible for only certain trusts. For example, any trust created before January 1, 2001 cannot be nonjudicially terminated.
Section 736.04115, Florida Statutes, governs judicial modifications of trust. When the trustee or a qualified beneficiary files a petition to terminate a trust, the trust may be terminated in whole or in part when:
- The purposes of the trust have been fulfilled;
- It has become illegal, impractical, wasteful, or otherwise impossible to fulfill the purposes of the trust;
- Compliance with the terms of the trust would defeat the fulfillment of the purpose of the trust; or
- There is no longer any material purpose of the trust.
Other Grounds for Terminating a Trust in Florida
Florida courts recognize other grounds for terminating a trust, including:
- It is not economical to administer the trust (for trusts under $50,000). This is called termination of an “uneconomic trust,” according to the Section 736.0414, Florida Statutes. The trustee can terminate a trust if the value of the trust assets is not sufficient to “justify the cost of administration.”
- Undue influence, fraud, mistake or duress. If a trust was created by mistake, under undue influence, duress, or fraud, the trust could be terminated under the Section 736.0406, Florida Statutes.
- There has been a merger of interests. A trust can be terminated when the legal and equitable interests of the trust have merged with another trust. For example, if multiple trusts have been created for the same beneficiary and have very similar terms, then the trusts can be joined and consolidated, resulting in the termination of the now “empty” trust.
How Can You Terminate an Irrevocable Trust in Florida?
If the trustee and all qualified beneficiaries agree to terminate an irrevocable trust or the value of the trust property is under $50,000, the trustee should draft a Plan of Distribution and Trust Termination Plan with the help of an estate planning attorney. Then, all qualified beneficiaries must sign the plan.
For all other grounds for termination, you must file a petition and obtain court approval in order to terminate an irrevocable trust in Florida. Besides termination, there may be other legal remedies to consider:
- Removal or replacement of the trustees. When a trustee is not performing their duties appropriately, the beneficiaries may consider replacing trustees with the individuals who can fulfill their duties or removing them altogether.
- Decanting an irrevocable trust (pouring all of the trust assets into a new trust)
- Modifying an irrevocable trust pursuant to the terms of the trust itself (i.e., a trust protector)
If you are considering terminating, modifying, or decanting an irrevocable trust in Florida, contact a knowledgeable estate planning attorney to discuss your options. Contact Legacy Protection Lawyers, LLP, to get a case review at 727-471-5868 today.