Do trusts end? Find out

How long does trust last? That’s because — that’s why we asked Patrick Hicks, head of legal affairs at Trust & Will, to help us understand what happens to trusts over time.

“Most trusts eventually come to a conclusion and wind up,” Hicks explained. “When all assets are paid out to the beneficiaries, the trust will terminate.”

In most cases, trusts terminate after their assets are fully distributed – but what about trusts that never pay out their assets? Will these trusts eventually reach an expiration date? Do trusts end?

“There is an outer limit to how long a trust can last,” Hicks told us, “but that’s rarely relevant. In practice, almost all trusts last until their assets pass to the beneficiaries.”

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And because Trust & Will’s simple online service lets you set up these documents in minutes, you can quickly take the extra step needed to create your first will, protect your estate from the costs of probate, or develop a guardianship plan for your children.

“A trust gives you more control over when and how assets are distributed after death,” explains Hicks. It’s also another way to ensure peace of mind, manage your finances and prepare for the future. If you decide to create a revocable living trust through Trust & Will, here’s what you need to know about how long your trust will last.

Do trusts end?

Do trusts end? Not necessarily.

“Trusts generally do not have an expiration date in the sense that they automatically terminate at some set time,” explains Hicks. “In fact, trusts are often used in situations where it is beneficial to have the trust remain in effect for a longer, potentially indefinite period of time.”

These types of perpetual trusts include dynasty trusts, which are designed to help families manage generational wealth, as well as some other types of irrevocable trusts. Because most families can manage their property with a revocable trust, they don’t have to worry about some of the problems that can come with managing a trust in perpetuity — and they don’t have to worry about whether their trust can end.

Why don’t trusts have an expiry date?

In most cases, trusts are not written with a stated expiration date. In fact, it is very rare for an expiration date to be included in a trust.

“Generally, trusts exist for a specific purpose and will be designed to remain in effect as long as necessary to serve that purpose,” Hicks says. “Having an expiration date generally would not help achieve that purpose—instead, the expiration date would terminate the trust and limit its ability to achieve that purpose.”

For example, most revocable living trusts are designed to transfer assets to designated beneficiaries after a person’s death. In some cases, these assets are transferred directly. In other cases, the assets may be held until the beneficiaries turn 18, 21 or 25. Once the trust has served its purpose and the assets are fully distributed, the trust naturally terminates.

Some families may choose to set up trusts with a specific purpose, such as a special needs trust, which allows them to distribute assets to a beneficiary over a longer period of time. Although these types of trusts may take longer to complete their purpose, these trusts also terminate after their assets are fully distributed.

This is why there is no clear answer to the question of how long trusts last. A trust lasts until it has fulfilled its purpose, whether it distributes its assets in a lump sum, holds its assets until its beneficiaries become legal adults, or makes several payments to beneficiaries over a set period of time.

What happens to assets in a trust when the trust ends?

In almost all cases, trusts terminate when their assets are paid out. This means that there are no assets left in a trust after it is terminated – instead, all of the trust’s assets have been distributed to the named beneficiaries.

“Generally, assets are paid out to the beneficiaries of the trust when the trust terminates,” explains Hicks. “This is true whether the trust ends because all assets are paid out, which is more common, or if the assets are paid out because the trust is scheduled to end, which is less common.”

If a trust is scheduled to be wound up before its assets are fully paid out, the final phase of asset distribution can be more complicated. “There can be some uncertainty about which assets go to which beneficiaries if the trust terminates,” Hicks told us. “This may be resolved through the trust document or it may be necessary to involve a court to direct what should happen.”

What happens if a trust does not distribute its assets?

It is possible, although rare, for a trust to be terminated before its assets are fully distributed. This is often what people are referring to when they ask “Do trusts expire?” However, this type of situation is extremely rare – and is unlikely to affect your estate plan.

“The Rule Against Perpetuities says that a property interest must be fully transferred within 21 years from a decedent,” explains Hicks. “This essentially means that you cannot hold property in limbo for more than 21 years after the death of a person now living.”

This is why you may see people claiming that trusts expire after 21 years. While this is technically true, very few trusts ever risk reaching the 21-year mark.

“The vast majority of trusts come to their own natural conclusion,” says Hicks, “to pay out their assets without running afoul of the Rule Against Perpetuities.”

Why is it important to set up a trust in addition to a will?

If you’re trying to decide between a will and a trust, you may want to go ahead and create both. We’ll let Hicks explain why.

“Wills are generally simpler documents that indicate where the assets go on death. Trusts often contain more specification about when assets can be distributed. For example, a trust may provide that assets are held in the trust for the beneficiary until they reach a certain age or achieve a specific goal, such as graduating or getting married. A trust provides more control over what happens after death than is typically found with a will.”

There is another reason to set up a trust in addition to a will – and that is to eliminate the time and expense that can come with the probate process. “Wills go through probate, which is often expensive and slow,” explains Hicks. “Having a trust is an easy way to avoid this process and create an almost seamless transfer of assets.”

Consider it another gift that you can pass on to your loved ones.