How to Get Out of an Irrevocable Trust

You Have An Irrevocable Trust and Want to Get Out of It – Here Are Possible Exit Strategies

By Attorney Paul Hanks, Ironclad Living Trusts 

Did you create an irrevocable trust and now badly want out of it ?  In another Blog this attorney commented on the many Risks & Drawbacks of the Irrevocable Trust. If despite all the drawbacks and limitations of an irrevocable trust you nonetheless decided to dress your estate in a trust of the irrevocable variety, then this Blog presents the limited, long shot options to terminate it. 

California Probate Code Section 15404 allows a way for termination of a trust without court intervention. If consents are obtained of the trust settlors as well as each and every beneficiary of the trust, then an irrevocable trust can be terminated. Although this manner of termination of an irrevocable trust does not involve the court, there are still drawbacks to this chosen pathway. The consent of each beneficiary must be free, voluntary and independent. There can be no coercion involved. Each beneficiary should be separately represented by legal counsel of their own choosing, or at least be issued an informed consent of their right to do so. The beneficiary should sign that informed consent at least 30 days before actually signing a consent to termination of an irrevocable trust. If minors are trust beneficiaries, then this pathway cannot be selected. 

A separate possible ground to terminate an irrevocable trust relies on Probate Code Section 15409(a), which provides that upon “petition by a trustee or beneficiary, the court may modify the administrative or dispositive provisions of the trust or terminate the trust if, owing to circumstances not known to the settlor and not anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially impair the accomplishment of the purposes of the trust.”  The burden under Section 15409 is high and clearly requires strong evidence that allowing the irrevocable trust to remain in place would actually “defeat or substantially impair the accomplishment of the purposes of the trust.” Another hurdle under this statute is gathering sufficient evidence that the information upon which the petition to terminate is based was either never known to the trust settlor, or could not have been anticipated by the settlor. 

In summary, there are very limited options which would allow for the termination of an irrevocable trust in California. An experienced trust and estates law firm can objectively assess whether or not it is worth the effort to seek to terminate an irrevocable trust.

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