In California, a trust terminates when any of  the following occurs:

1. The term of the trust expires.
2. The purpose of the trust is fulfilled.
3. The trust purpose becomes unlawful.
4. The trust purpose becomes impossible to fulfill.
5. The trust is revoked.

On termination of the trust, the trustee continues to have the powers reasonably necessary under the circumstances to wind up the affairs of the trust. (California Probate Code section 15407.)

But when can the trust be terminated because it has become uneconomically low compared to the costs of keeping the trust (costs such as cpa fees, trustee fees, attorney fees, investment fees, and taxes)? California probate code 15408 gives the court authority to terminate a trust if the court determines that the fair market value of the trust has become so low in relation to cost of administration that continuation of the trust will defeat or substantially impair the trust purpose.

And, for California trusts,  if the value of the trust does not exceed $40,000, then the trustee has the power to terminate the trust. (California probate code section 15408 (c).)

Copyright 2012 Phillips Law Offices, A Professional Corporation