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How to Dissolve a Trust in 3 Steps


If you want to end a trust, the process depends on the nature of the entity. A revocable trust can be ended relatively easily, in just three steps. The trust’s founder and owner can typically dissolve a revocable trust at will. In most cases, this involves nothing more complicated than filling out some paperwork and distributing the trust’s assets. An irrevocable trust is far more complicated, though, so it’s important to plan ahead. A financial advisor can help you make sure your trust is set up correctly and that you’ve protected your assets.

Trusts and State Law

As a threshold matter, it’s important to note that trusts are an issue of property law and estate law. These are two very jurisdiction-specific areas of the law. Most, if not all, laws that govern a trust are based on state law.

While this article will discuss common practices, giving you a sense of what to expect in most places, the actual process for dissolving a trust depends entirely on where the entity is based and the type of trust you have. In some cases, just the details will differ. In others, the process may be entirely unique. Be sure to consult a lawyer before making any plans.

Key Definitions In A Trust

Before you can understand how your trust works it is important to know what terms and aspects make up the entire document. When it comes to trusts, there are typically three main parties involved:

  • The Founder: Otherwise known as the grantor or trustor, this is the person who established the trust. They typically provide most, if not all, of the trust’s assets. They also set the terms of the trust, such as who benefits from it and who will oversee its operations.
  • The Beneficiary: The beneficiary is the person who receives assets from the trust. This can range from cash payments, such as in a trust fund, to property access, such as when a home is held in trust for use by the family. A trust can have multiple beneficiaries and a founder can name themselves a beneficiary in their own trust.
  • The Trustee: The trustee is the person who manages and oversees the trust. This includes handling all administrative work associated with the trust’s assets, managing any investments, enforcing any terms set by the founder and making distributions to the beneficiaries. It is important to understand these relationships because they define who can end a trust and how it is done.

The process of ending or “dissolving,” a trust depends entirely on whether it is a revocable or an irrevocable trust.

Revocable Trusts

how to dissolve a trust

A revocable trust is one in which the trust’s founder can change or end at any time. In a typical revocable trust, the founder has the authority to amend the terms, beneficiaries and assets at will. Individuals can use a revocable trust, sometimes known as a “living trust,” for a wide variety of reasons. This can include financial management, distributing money to family members and even planning for incapacitation.

You might revoke a trust for an equally broad range of reasons. Most notably, as its founder, you might dissolve a revocable trust if you want to completely rewrite its terms or if the beneficiaries no longer need its assets.

Dissolving a revocable trust typically involves the trust’s founder taking the following steps:

1. Plan for the Assets

Step One is making a plan for the assets that it holds. For the most part, this means actually removing the assets and redistributing them as you see fit, such as transferring cash back into your own bank account. You may also give instructions on how those assets are to be distributed once the trust wraps up, such as instructing its beneficiary to transfer property to a beneficiary at the trust’s end. Regardless, a trust cannot end with assets still in its name.

2. Draft a Declaration of Intent

Step Two is creating a declaration of intent. Ending a revocable trust is a matter of paperwork. The details of this paperwork vary based on the state and jurisdiction. However, in most cases, you will draft a document declaring your intention to dissolve the trust and have it notarized. This document is sometimes called a revocation of living trust or trust revocation declaration.

3. File the Document With a Court

Step Three is similar to winding up any other legal entity such as a corporation or partnership. The trustor should sign and date the document. In many states the final step involves filing the document with a judicial body such as a probate court or similar entity, depending on the jurisdiction. For example, if the trust that is being dissolved was filed or registered with a court then the document must be filed with that court. However, it is not always necessary to file anything with a court. In such cases, you can simply attach the signed and dated document to your files that govern the disposition of your assets.

Irrevocable Trusts

An irrevocable trust is a trust where the founder has no authority to make changes once it has been established. While they can contribute assets, the founder cannot withdraw or remove anything once it belongs to the trust. Nor can they amend its terms, trustees or beneficiaries. The trust is an independent legal entity once it has been created and it operates that way.

As a result, the founder of an irrevocable trust does not have the independent authority to dissolve it. Instead, in most cases, an irrevocable trust can only be dissolved by court order.

The details of dissolving an irrevocable trust differ widely between states and jurisdictions. However, typically you will need to get approval from the trust’s beneficiaries and potentially its trustees as well. (If you are a beneficiary, you will likely need approval from the trust’s founder if they still live, its trustees and all other beneficiaries.) If you have approval from all the relevant parties, you will then have to petition a court and state your reasons for dissolving the trust.

Judges typically need a good reason to order a trust dissolved. For example, you can demonstrate that the trust’s terms have become illegal or impractical or that it’s no longer financially viable to operate. If the trust has a clearly stated purpose, you may be able to demonstrate that its terms no longer meet its purpose. If the trust is based on a specific relationship, such as a marriage, you may be able to demonstrate this relationship doesn’t exist anymore.

This is not a black-and-white area. Judges will evaluate this based on the strength of each individual claim weighed against state law. If they find the reason compelling and if they find a basis in state law, they will order the trust dissolved.

That said, most petitioners try to unwind an irrevocable trust because they don’t like its terms. For founders, this might mean that they want their assets back or they don’t want to give this money to a specific beneficiary anymore. For beneficiaries, they may not like the terms of their distributions anymore. These are the most common reasons for dissolving an irrevocable trust and they almost never succeed.

The Bottom Line

how to dissolve a trust

The process of dissolving a trust depends on the nature of the trust itself. As the founder, you can dissolve a revocable trust anytime you want. Irrevocable trusts, however, typically require a court order and most judges will require a very good reason. It’s important to properly plan out what you want out of your trust before setting it up so that you can do it correctly.

Tips for Estate Planning

  • Do you know if your trust is the right format for your finances or estate? A financial advisor can help you set up your trust, protect your assets and grow your wealth. If you don’t have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s matching tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Before trying to end a trust, let’s learn how they’re made. We can start with a guide to the different types of trusts.

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