Perhaps you need to make a distribution to a specific Beneficiary, but the terms of the trust do not permit you to do so. You may also want to switch from an Individual Trustee to a Corporate Trustee to enjoy certain benefits that an individual Trustee cannot provide.
There are numerous other reasons why you may want to amend an irrevocable trust. To find out if and how your irrevocable trust may be amended, read the following and then consult with an experienced estate planning attorney for more information.
Revocable Trusts vs. Irrevocable Trusts
Trusts come in two basic varieties—revocable and irrevocable. A revocable trust can normally be amended or revoked by the Trustor. An irrevocable trust cannot be amended or revoked once it has been created, or at least that is what the document typically says.
But just because a trust says it cannot be amended doesn’t necessarily mean it cannot be amended. In fact, there are several ways an irrevocable trust can be amended or even terminated.
Circumstances Under Which An Irrevocable Trust Can Be Amended
If you have a good reason to amend an irrevocable trust you can usually go to court and ask the judge to approve the changes. What’s more, there are laws that specifically authorize an irrevocable trust to be amended or terminated under certain circumstances. These circumstances include:
- When all the Beneficiaries agree and consent to the amendment.
- When there is a significant change in circumstances.
- It has become unreasonably expensive to administer the trust.
- When the Trustor made a mistake in trust or law when creating the trust.
- To obtain certain tax benefits.
- To comply with changes with federal law.
- When the trust has a Trust Protector or other individual who has been granted the power to make certain changes to the trust.
- When the sale or disposition of all property held by the trust effectively causes it to be terminated.
There are also specific requirements that must be met for each of the circumstances listed above. For instance, if the Beneficiaries all consent to the amendment, it must still be consistent with the purposes of the trust.
Decanting a Trust
An alternative to amending a trust may exist if the trust authorizes the Trustee to distribute the income and assets of the trust at his or her discretion. The Trustee may then be able to distribute the trust assets to a new trust with better terms. This is referred to as decanting a trust. Again, there are rules that must be followed when decanting a trust, including that the changes must be for the benefit of all the Beneficiaries.
Consult With A Knowledgeable And Experienced Estate Planning Attorney
Modifying a trust can make it more efficient and ensure that it fulfills the Trustor’s intent. But it can also be troublesome and expensive, particularly if all the Beneficiaries do not agree.
It is also possible for amending a trust to have unexpected and unanticipated tax consequences. So, it is important to consult with an estate planning attorney who is familiar with the relevant tax laws.
If you have questions regarding estate planning and trusts, we are here to help. Call us today, for a free consultation with an experienced estate planning advisor. Contact us or sign up below for one of our events.