Can a Marital Trust Be Terminated in the Assets Lose Value?
Full Question:
Answer:
We suggest reading the terms of the trust document carefully to determine the right to terminate the trust. If there are no provisions made for termination of the trust in the trust document, it is possible to petition the court to terminate the trust according to the following CA statutes:
15408. (a) On petition by a trustee or beneficiary, if the court
determines that the fair market value of the principal of a trust has
become so low in relation to the cost of administration that
continuation of the trust under its existing terms will defeat or
substantially impair the accomplishment of its purposes, the court
may, in its discretion and in a manner that conforms as nearly as
possible to the intention of the settlor, order any of the following:
(1) Termination of the trust.
(2) Modification of the trust.
(3) Appointment of a new trustee.
(b) Notwithstanding subdivision (a), if the trust principal does
not exceed twenty thousand dollars ($20,000) in value, the trustee
has the power to terminate the trust.
(c) The existence of a trust provision restraining transfer of the
beneficiary's interest does not prevent application of this section.
15409. (a) On 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. In this case, if
necessary to carry out the purposes of the trust, the court may order
the trustee to do acts that are not authorized or are forbidden by
the trust instrument.
(b) The court shall consider a trust provision restraining
transfer of the beneficiary's interest as a factor in making its
decision whether to modify or terminate the trust, but the court is
not precluded from exercising its discretion to modify or terminate
the trust solely because of a restraint on transfer.
Please see the statutes at the following link to determine applicability:
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=prob&group=15001-16000&file=15400-15414