You asked whether there is a law regarding the termination of small trusts. You also asked whether the financial threshold in such law could be changed.

SUMMARY

The law allows a probate court to completely or partially terminate a noncharitable trust valued at up to $ 40,000 if it determines that termination is fair and practical and the trust's continuation is not in the beneficiary's best interest or cost-effective. The legislature established the $ 40,000 threshold in 1994. Previously it had been $ 20,000.

The law also allows a probate court to terminate a charitable trust valued at up to $ 150,000 except those for caring for or improving cemeteries. The court may do so if it determines that its continuation would (1) be uneconomic when the costs of operating it, probable income, and other relevant factors are considered, or (2) not be in the beneficiaries' best interest. The legislature established the $ 150,000 threshold in 1996. Previously it had been $ 65,000.

It appears the legislature has the constitutional authority to increase the threshold for each type of trust. Linda Dow, Chief Counsel for the Office of Probate Court Administrator told us that she saw no reason why the legislature could not consider raising the thresholds. She did not recommend new thresholds. She said the amount of any new threshold would be up to the legislative branch after taking into account such things as changes in the cost of living since the thresholds were established and how long the current thresholds have been in affect.

TERMINATION OF NON-CHARITABLE TRUST

The law allows a probate court to partially or completely terminate a non-charitable trust if the (1) continuation of the trust is (a) uneconomic when the costs of operating the trust, probable income and other relevant factors are considered or (b) not in the beneficiaries' best interest; (2) termination of the trust is equitable and practical; and (3) trust's current market value does not exceed $ 40,000 (CGS § 45a-484). The legislature established the $ 40,000 threshold in 1994, when it replaced the old threshold of $ 20,000 (PA 94-98).

The court may do so only after holding a hearing based on application by the trustee, by any beneficiary entitled to income from the trust, or by such beneficiary's legal representative. It must give reasonable notice of the hearing to all beneficiaries who are known and who have an interest in the trust.

If the probate court orders termination of the trust, in whole or in part, it must direct that the principal and undistributed income be distributed to the beneficiaries in whatever manner it determines is equitable. The probate court may also make whatever other order it deems necessary or appropriate to protect the beneficiaries' interests.

The court may not terminate a trust if the settlor (person who created the trust) objects, if the interest of the beneficiaries cannot be ascertained, or if it is a spendthrift trust. A spendthrift trust is created to provide some income to the beneficiaries while preventing both the beneficiary and his creditors from having access to the money or property held in trust except to the extent that the trustee distributes it.

TERMINATION OF A CHARITABLE TRUST

By law, the trustee, charitable beneficiary, or the attorney general may file for termination in probate court if the market value of a charitable trust's assets is less than $ 150,000 (CGS § 45a-520). The court may terminate the trust, after a hearing, if it determines that its continuation would be uneconomic or would not be in the beneficiaries' best interest. Notice of the hearing must be given to the attorney general, the trustees, the creator of the trust, and any charitable beneficiary the trust specifically designates. The court must distribute the assets to any charitable beneficiary the trust document designates or, if there are none, to other charitable entities that the court determines will fulfill the trust's charitable purposes.

Charitable trusts may be created by a will, deed, or other legal document providing that specified real or personal property is to be held by a trustee and the income or principal used for charitable purposes.

The legislature increased the threshold from $ 10,000 to $ 15,000 in 1982 (PA 82-155), to $ 20,000 in 1984 (PA 84-294), to $ 65,000 in 1986 (PA 86-234), and to $ 150,000 in 1996 (PA 96-35).

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