Many people rely on Irrevocable Trusts as part of their estate plan. These tools are powerful in ensuring a person’s final wishes are respected without the need to go through probate. However, a change in life circumstances sometimes makes it necessary to alter Irrevocable Trusts.
While making these changes might take some effort, you have the right to revise or even terminate the Trust during the course of your life. In these situations, an experienced estate planning attorney could provide crucial assistance with Cary Irrevocable Trust modification and termination.
The easiest way to change the terms of an Irrevocable Trust is by consent. While changes to an Irrevocable Trust often require court approval, this is not the case when the modifications are made by consent. This is likely the simplest way to amend a Trust, but it is important to note that it requires the consent of the grantor as well as every potential beneficiary, no matter how unlikely it is that they will inherit.
When all parties consent, a trustee and their attorney can either modify a material term of the Irrevocable Trust or terminate it entirely. To protect the rights of everyone involved, it is best to have this modification in writing. In some cases, a parent can consent on behalf of their minor children.
When modifying by consent is not possible, it will take an act of the court to change or terminate a Trust. Importantly, this is the only option in situations where the grantor is no longer living. In these cases, the process begins with the filing of a petition with the Superior Court.
When modifying a Trust, the court faces more limitations compared to revisions made by consent. If the trustee seeks to terminate the Trust entirely, the court may only do so if the judge determines that continuing the Trust is unnecessary to achieve its material purpose. Regarding modifications, the court may only agree to a change if they determine it is consistent with the Trust’s material purpose.
However, there is an important exception. Should the court decide that the reasoning behind the proposed alteration substantially outweighs the Trust’s material purpose, the judge is empowered to allow the petition. A well-practiced lawyer in the area could advise a person seeking trust modification or termination on the likely outcome of their court case.
The opinions of the Trust beneficiaries are important during this process. If each beneficiary agrees to the modification, the court is more likely to agree. However, an objection by a beneficiary is not enough to prevent the change from happening. The court can still grant a modification as long as the beneficiaries’ rights are adequately protected.
In some cases, the Trust document will give a trustee some discretion to make distributions of assets. A trustee with this power could use a process known as “decanting” to alter the Trust by essentially pouring its assets into a new Trust with more favorable terms. This is possible without court intervention if the Trust documentation allows it. However, in this instance, the trustee cannot be a beneficiary of the Trust. Cary residents who are considering decanting a Trust should consult with a knowledgeable attorney.
There are many important estate planning decisions in the process of setting up Trusts. A dedicated legal team could help ensure that your plan is sound to avoid mistakes or disputes once you have passed away. Let a skilled attorney assist you with the Irrevocable Trust modification and termination process. Call today for a confidential meeting with one of our team members.