Under what condition can an irrevocable trust be terminated before the normal distribution date?

An irrevocable trust can typically only be modified or terminated under specific conditions due to its nature of being set up to be unchangeable without the consent of all parties involved. The correct condition for an irrevocable trust to be terminated before the normal distribution date is when all beneficiaries agree to the termination and a court also orders it.

This requirement for unanimous agreement among beneficiaries ensures that all parties with interest in the trust's assets are considered before making a significant change. The court's involvement adds a legal layer of protection to ensure that the termination aligns with the settlor's intentions and adheres to applicable laws. The necessity of both agreement and court approval helps prevent disputes and potential harm to the beneficiaries' interests.

The other scenarios do not meet the rigorous standards typically required for the termination of an irrevocable trust. For instance, a request from just one beneficiary would not suffice, as it could lead to conflicts with the terms set by the trust's creator. Likewise, a trustee unilaterally deciding to terminate the trust for tax reasons does not take into account the rights and consensus of the beneficiaries, which is crucial in these matters. Lastly, while a significant diminishment of trust assets could impact decisions related to the trust, it does not provide a legal