📜 New Law Makes It Easier to End Low Value Irrevocable Trusts in California
Starting January 1, 2025, California madeit easier to terminate small irrevocable trusts and subtrusts that no longer make financial sense to maintain. These updates offer much-needed flexibility for trustees and beneficiaries—but there’s an important caveat: the trust document itself can override this rule.
💸 Irrevocable Trusts Worth $100,000 or Less Can Be Terminated Without Court Involvement
If the fair market value of an irrevocable trust (or subtrust) is $100,000 or less, the trustee may now terminate it without court approval. This change is especially helpful for older estate plans where the costs of managing small subtrusts (like survivor’s or bypass trusts) outweigh the benefit of keeping them active.
⚖️ What If the Trust Is Worth More?
Even if the trust exceeds $100,000, it may still qualify for termination if the cost of administering the trust is too high relative to its value. A trustee or beneficiary can petition the court to step in. If the court agrees that continuing the trust no longer serves the purpose it was created for, it may:
Terminate the trust,
Modify its terms, or
Appoint a new trustee.
The court will aim to stay as close as possible to the original intent of the person who created the trust (the settlor).
✍️ What If Everyone Agrees?
If the settlor (if still living) and all beneficiaries agree, a trust can also be terminated without going to court. If one or more beneficiaries do not agree, the court may still allow termination as long as the non-consenting party’s interest is not significantly harmed.
⚠️ Important: The Trust Can Override This Law
This new rule applies only if the trust doesn’t state otherwise. If the trust includes language that restricts or prohibits early termination—even for small balances—those instructions take priority. Trustees must review the trust document carefully before taking any steps.
🚫 What About Spendthrift Clauses?
Even if the trust contains a spendthrift provision (which limits a beneficiary’s ability to transfer their interest), it does not prevent termination under the new law.
Why This Matters
If you’re managing or benefiting from a small irrevocable trust or subtrust created after someone’s death, this new law may help simplify your responsibilities, reduce costs, and bring closure—as long as the trust’s own rules allow it.
📞 Not Sure If Your Trust Qualifies for Termination?
At Kaminski Law Group, we help California families and trustees review and manage their estate plans with clarity and confidence. We’ll walk you through your options and help ensure your next steps align with both the law and the intent behind the trust.
📍 Roseville, CA
📞 (916) 540-7618
📧 hello@californiatrusts.law
🌐 www.californiatrusts.law
