How to Dissolve a Trust in Phoenix, AZ

If you’re looking to dissolve a trust, the first thing you’ll want to determine is the type of trust you’re dealing with:

• A revocable trust is a living trust. It can be amended or revoked by the grantor (the individual who created it). A revocable trust is created with a written agreement between grantor and the trustee (the person who will manage the assets in the trust). The grantor can also name themselves as the trustee for their lifetime and can write provisions allowing them to revoke or dissolve the trust. This is why this type of trust is called a revocable trust.
• Irrevocable trusts, on the other hand, cannot be adjusted or amended once they are officially organized. Once the assets of an irrevocable trust are re-titled and placed in the trust, they belong to the trust beneficiaries, not the grantor. Arizona has adopted an Arizona Trust Code (“ATC”), which stipulates that an irrevocable trust can be terminated by consent of the trustee and the beneficiaries. Arizona law allows for some irrevocable trusts to include modification clauses, which allow for changes at the discretion of the beneficiary. However, absent any modification clauses, it’s extremely difficult to alter an irrevocable trust. This is because an irrevocable trust is considered a separate legal entity from the grantor, so any assets that are transferred from the grantor to the trust are permanently removed from the grantor’s estate. Usually, this is done to protect assets from liabilities and to protect the assets for intended beneficiaries.

Reasons to Dissolve a Revocable Trust

As we mentioned above, a revocable or living trust is an estate planning instrument where the grantor can dissolve the trust:

• at any time
• for any reason
• during his or her lifetime

A person may seek to dissolve their revocable trust for numerous reasons. These reasons are usually due to major life changes, including:

• Marriage or divorce
• Adoption or birth
• Death of a beneficiary
• Changing Trustees
• Acquiring new property
• Moving to a different state
• Adding or changing a beneficiaries

However, significant life changes don’t always require you to make changes to your trust. If you’re unsure if you should make a change to your trust, you should always seek out the advice of an experienced estate planning attorney.

Steps to Dissolve a Revocable Living Trust

Once you’ve decided that you want to revoke a trust, you must take the following steps to dissolve it:

1. Review the Trust Agreement. You will want to make sure that you are aware of any specific requirements contained in the trust. For example, the trust may require that the trustees or beneficiaries be notified before it’s dissolved.
2. Consult an Estate Planning Attorney. It’s important to properly terminate the trust because there is potential liability associated with actions you take as a trustee. You may need to petition the court for approval to dissolve the trust. An estate planning lawyer can help guide you through the process while ensuring that all legal requirements are met.
3. Defund the Trust. This step requires you to transfer all the assets out of the trust. This is the most time consuming and burdensome step because it requires that all titled property and financial accounts included in the trust be re-titled and filed with the appropriate agencies. For example, if your house is held by the trust, you would need to prepare a new deed transferring the house from the trust and back to you. This deed must then be filed with the county. It is very important to keep records and copies of every transfer in a personal file.
4. Complete a Written Revocation. The final step is to revoke the trust by creating a written document. This document must include a statement clearly indicating that you intend to revoke the trust. This document should be signed before a notary public, and copies of the revocation should be delivered to the trustees and to anyone else aware of the trust (Ex. Trustees, financial institutions, beneficiaries, etc.). Keep in mind, if your trust was registered with the court, you should also file the revocation with the court. Lastly, make sure to keep this document in a safe place. It’s a good idea to keep it with the original trust and any other estate planning documents.

How Can an Estate Planning Attorney Guide You Through the Process?

When you need to dissolve a trust in Scottsdale, Phoenix, Peoria, Chandler, or Tucson, you can rely on Brown & Hobkirk, PLLC to help oversee the process with you. As an experienced estate planning law firm, we understand the complexities and details involved with dissolving a trust.

We can help you navigate any questions about dissolving your trust and advise you about the specific laws that apply to your state. We can streamline the process for you and help you design a new plan that fits your current situation.

With something this important, it’s just not worth it to take any chances. Be sure to ask an experienced attorney for help when dissolving your revocable trust.

Contact Brown & Hobkirk, PLLC

If you would like more information on how to dissolve your revocable trust, contact the knowledgeable estate planning attorneys at Brown & Hobkirk, PLLC. We understand the unique laws, policies, and regulations in Arizona and have successfully helped many Arizona residents navigate the complicated estate planning process. We are ready to help you with any questions. Contact us today to schedule your consultation.