How Do You Revoke a Trust in Maryland?
Trusts can be useful for asset protection and tax planning. They may also be designed to provide resources for special needs individuals. Trusts can also support charitable causes, protect a family business, and provide for the education of children and grandchildren.
However, what happens if you change your mind after creating a trust. Is there a way to revoke a trust in Maryland? Our Maryland estate planning attorney assists clients with creating trusts, but we also work with clients who want to revoke or amend trust agreements.
Why Do You Want to Revoke a Trust?
Changes in your situation or life may necessitate modifying or revoking a trust agreement. For example, beneficiaries may pass away, or you may want to liquidate property being held by the trust. A divorce or marriage may be the reason for revoking a trust. In other cases, a trust no longer meets the needs and goals of the settlor or beneficiaries.
The terms of the trust and the type of trust significantly impact the process of revoking a trust. Therefore, before you attempt to revoke a trust in Maryland, you need to carefully examine the terms of the trust and discuss the revocation with an experienced Maryland trust attorney.
Terminating a Revocable Living Trust in Maryland
Maryland Estates and Trust Code §14.5-605 states that a trust may be revoked or amended by the settlor unless the terms of the trust expressly provide that the trust is irrevocable. The code section does not apply to trusts created before January 2015. However, the process for dissolving a revocable living trust is similar under the Uniform Trust Act and common law.
To revoke a trust that does not expressly state it is irrevocable, the settlor can:
Remove all assets from the trust, including transferring titles, deeds, and other legal documents from the trust’s name back to the settlor’s name
Draft a document stating that the settlor revokes all terms and conditions of the trust according to the settlor’s rights under the trust terms and the law
Create a Will or codicil that refers explicitly to the trust and devise the property through the Will that would have otherwise passed through the terms of the trust
Upon revocation of the trust documents, the trustee delivers the trust property as the settlor directs in the revocation document. The settlor is the trustee for a revocable living trust in most cases. Therefore, removing the property from the trust and signing a dissolution document revoking the trust is the simplest way to dissolve the trust. If the trust was registered with the court, the revocation of the trust should also be registered.
If more than one person created the revocable trust, dissolving the trust may be a bit more complicated. First, the terms of the trust may provide the process for revoking the trust and disposing of the trust assets. Absent specific terms within the trust, you must examine the type of property within the trust to determine each settlor’s right to revoke or modify the terms of the trust.
It is always wise to seek legal counsel when dissolving a revocable trust agreement, especially if more than one party created the trust. You want to ensure that you do not take any action regarding the trust property, resulting in personal liability for damages.
Terminating an Irrevocable Trust in Maryland
Irrevocable trusts are used for asset protection, Medicaid planning, and limiting estate taxes. By its very nature, an irrevocable trust is an agreement that cannot be modified or terminated by the settlor. The settlor does not own or control the property once it is transferred to the trust.
However, the trustee of an irrevocable trust may have the power to terminate the trust in specific situations. Some situations may require the trustee to petition the court for power to revoke the trust. Instances that might result in legal grounds for dissolving an irrevocable trust include:
The trust agreement contains specific language giving the trustee the power to modify or revoke the trust under certain conditions
The trustee fulfills the terms of the trust, and the trust is no longer necessary
The purposes of the trust have become illegal, wasteful, impracticable, or impossible to fulfill
A material purpose of the trust no longer exists
The trust has become unreasonably expensive to administer
An irrevocable trust may also be revoked by mutual consent. The settlor and all beneficiaries must agree to terminate the trust. The agreement should be in writing, signed by all parties, and notarized.
The court has the power to modify or revoke a trust agreement in Maryland if there was a mistake in the trust. The court may dissolve a trust agreement if it was created under duress or when the settlor lacked the legal capacity to create a trust.
A settler may petition the court to revoke a trust based on a mistake. The settlor must present clear and convincing evidence of the mistake to justify the revocation of the trust agreement. The court rarely considers a change of heart evidence of a mistake.
Revoking a Trust Without an Attorney Could Result in Damages
You may need to petition the court to dissolve the trust. In that case, you must have evidence supporting a legal reason for terminating the trust agreement.
Attempting to dissolve an irrevocable trust without legal counsel could result in costly and time-consuming litigation. The trust beneficiaries may sue the trustee and the settler for damages if the trust is revoked without legal justification.
Federal and state laws govern the creation, operation, and termination of trusts. It may be impossible to modify or revoke a trust once it is created. An attorney analyzes the terms of the trust and the applicable laws to determine your options for modifying or dissolving a trust agreement.
Contact Our Maryland Estate Planning Attorney for More Information About Trusts
Trusts can be extremely beneficial as financial and estate planning tools. However, deciding which type of trust meets your needs can be confusing. Contact our Maryland estate planning attorney for more information if you have questions about trust agreements.
