Terminating Irrevocable Trusts—Releasing Money Early is Possible; Although Not Always Easy.

Can you bust open an irrevocable Trust and obtain your money? There is a way to make that happen under the California Probate Code.

The following is a verbatim transcript of this video:

If you were left an inheritance in an irrevocable trust, it can be a little frustrating. Because you actually have to go to the trustee just to ask for trust distributions. So, even though the trust might authorize the trustee to give you money for things like your health, education, maintenance, and support, that doesn’t mean that the trustee is going to comply with that. And believe it or not, the trustee actually has a duty to find out what your needs are. So they can’t just sit on their hands and do nothing. And yet, so many trustees do exactly that.

But there is a way to terminate an irrevocable trust. It’s not easy. It’s not an absolute right that you have if you’re a beneficiary, but there are some avenues that you can pursue. The Probate Code has a number of different provisions that allows the termination of an irrevocable trust. Things like changed circumstances. Or, if all the beneficiaries agree. Or if the beneficiary and the trustee agree. Sometimes you can get these people to work together to terminate your trust. But the one thing you have to understand is that when you have an irrevocable trust, you’re not the only owner of that money. You’re not the only beneficiary of that money. There’s other people who have a right to some of that money. And those other people are the remainder beneficiaries.

So if you look at your trust and it says your money is supposed to be held for your lifetime. And then after you pass away, it goes to somebody else. That somebody else, they have a right to some of that money. They don’t have a right to it right now, but they will have a right to it in the future. So when you terminate a trust and you are going to distribute the assets out, those remainder beneficiaries have to be given something. They have a right to at least a piece of that trust estate. It’s not 100% your money.

It’s hard for a lot of people to understand that concept. Because a lot of times people think well, it’s my money. It was left in trust for me. And that’s a true statement but only right now, today. It also is left in trust for the remainder beneficiaries and they do have some right to that. So that means you have to deal with those people. And typically the way you deal with them is you try to negotiate with them. See if they’re willing to take some payment of money in exchange for allowing you to terminate the trust and obviously, you hope that that payment is as small as possible. But you’re going to have to work something out.

Same with the trustee. So if you have a trustee of your trust who is going to oppose your trust termination petition, you’re going to have to deal with that trustee and typically the way you do that is you tell the trustee, look, I’m willing to pay a reasonable trustee fee for all the good work that you’ve done, but I do want you to support me when I go into court and ask that the trust be terminated.

So there’s a right way to do these things, but it’s not based solely on the Probate Code. A lot of it comes down to how good are you at negotiating with these other parties in helping to kind of show them the right way to get to a trust termination. If you’re not good at that part of a case like this, then it’s going to go poorly. Because even if you go to court, and even if a judge orders termination of the trust, the Probate Code says that when the assets come out, money has to go to each of the beneficiaries. Not just the current beneficiaries, but the remainder beneficiaries as well. So if you can negotiate that up front. Work with them and try to work out a deal, it’s far, far better than waiting for the judge to make the decision which is probably going to result in something that you’re not too happy with.

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