In Florida, trusts are legal arrangements utilized to fulfill a vast array of purposes, including minimizing estate taxes, passing property to beneficiaries outside of probate, and saving money on related expenses (e.g., court fees).
In this sense, irrevocable trusts can be useful tools for individuals who want to ensure their wishes are satisfied upon death with their legacy passing to the right hands. However, what happens if the owner of an irrevocable trust decides to dissolve it?
In this article, you will discover how it is possible to dissolve an irrevocable trust in Florida.
Florida Irrevocable Trust – What Is It?
Different from a revocable trust, an irrevocable trust cannot be modified once it has been signed by the trust maker (trustor).
After setting up and signing an irrevocable trust, the trustor gives up ownership of all assets held in the trust. Consequently, the trustee will keep the ownership of such assets up until the trustor’s death, after which the assets will be distributed to the decedent’s beneficiaries.
Typically, irrevocable trusts are utilized by individuals who want to reduce taxable estate— even though assets held into an irrevocable trust may incur gift taxes, depending on the case.
Dissolving an Irrevocable Trust in Florida – Is It Possible or Not?
Even though it is possible to dissolve an irrevocable trust in Florida, it is still a complicated situation as the trustor will need to prove that either the trust is not serving the interests of its beneficiaries or the purpose of the trust has been frustrated.
If you need to dissolve an irrevocable trust in Florida, the first step is to seek guidance from an expert estate planning attorney to assess your case and find feasible manners to dissolve the arrangement.
Dissolving an Irrevocable Trust in Florida – Judicial Termination vs Non-Judicial Termination
As provided by Florida law, an irrevocable trust can be dissolved either through judicial termination or non-judicial termination.
Section 736.04115 of the Florida Statutes provides the possibility of judicial modification of irrevocable trust when modification is in the best interest of beneficiaries.
In such cases, when either the trustee or a qualified beneficiary files a petition to terminate an irrevocable trust, the court may determine the trust to be terminated in whole or in part if:
- the purposes of the irrevocable trust have not been utterly satisfied;
- the trust has become illegal, unfeasible, wasteful, or otherwise impractical to satisfy the purpose(s) of the trust;
- the compliance with the terms in the trust agreement would preclude the fulfillment of the purpose(s) of the trust; or
- there is no material purpose of the trust any longer.
Section 736.0412 of the Florida Statutes discusses the nonjudicial modification of irrevocable trust.
In Florida, an irrevocable trust can be terminated without judicial termination if the trustee and all qualified beneficiaries in the trust unanimously agree to terminate the arrangement. However, this provision is permissible only in very specific circumstances.
For instance, no irrevocable trust created before January 1, 2001, can be terminated by this method.
Dissolving an Irrevocable Trust in Florida – Feasible Grounds To Terminate a Trust
Courts in Florida also recognize other grounds for terminating a trust, including if is not economical to administer the trust, if the trust was created under undue influence, fraud, duress, or by mistake, and if there has been a merger of interests with another trust.
For example, for a trust under $50,000, it is possible to file a petition for the termination of an uneconomic trust, in which the value of the trust is not sufficient to justify the cost of administration, as provided by Section 736.0414 of the Florida Statutes.
Plus, besides termination, there may be other legal solutions to consider, such as removing or replacing a trustee, decanting an irrevocable trust, or modifying the trust according to the terms of the trust itself.
Irrevocable Trust in Florida – Better Planning Than Regretting
Even though it is possible to dissolve or terminate an irrevocable trust, it is extremely recommendable to seek professional guidance before making a decision and signing any trust agreement.
An irrevocable trust can be an excellent tool for asset protection, estate planning, and tax deduction, but it can also turn into a problem depending on the situation.
We Can Help You to Dissolve an Irrevocable Trust in Florida
Dissolving an irrevocable trust in Florida can be a time-consuming and stressful process. Attorney Romy B. Jurado Esq., have expert attorneys that will work each case out individually to help clients throughout the trust termination.
Waste no time and money with uncertainty. Get in touch with Attorney Romy B. Jurado today by calling (305) 921-0976 or emailing Romy@juradolawfirm.com to schedule a consultation.