irrevocable trust Archives - Mendes Weed, LLP

Is an Irrevocable Trust Really Irrevocable?

While irrevocable trusts tend to make some grantors uneasy, as they associate an irrevocable trust with words such as irreversible, final, and unalterable, the truth is, it is possible in some instances to revoke an irrevocable trust.

Cases to Support an Irrevocable Trust

A trust and estate planning lawyer will ease your concerns about an irrevocable trust by informing you of statutory provisions that allow you to make provisions to your trust.

In the event a grantor of an irrevocable trust has gifted money to a beneficiary at a specific age, it is sometimes wise to be allowed a provision to alter that trust. If a beneficiary is showing signs that inheriting the money at the specified age could be detrimental, cause harm, or risk losing the inheritance, the grantor may be allowed to transfer that money to another trust. This provision not only protects the beneficiaries’ inheritance, but it also assures the guarantor his wishes will be respected.

In the event the trustee of a trust needs to be changed, or perhaps the terms of the trust will be frustrated if the trust continues, you may want to consider meeting with a lawyer to discuss your options. There are many reasons that a trust may need to be revoked of modified.

For a thorough understanding of how an irrevocable trust can be used toward your benefit, it is best to contact an experienced trust and estate planning attorney with knowledge of how the laws relate to your situation.

How Can We Revoke an Irrevocable Trust?

The first action should be to consult a lawyer with experience in trust and estate planning and specifically revoking an irrevocable trust. An attorney will help you to understand whether it allows for modification, and what circumstances it allows for a modification.

If it does not allow it, you have a few options to petition the court:

Changed Circumstances: If you are the trustee and the grantor is still alive, refer to the document itself for specific instructions on revoking the trust and returning the assets to the grantor.

Mutual Consent of Modification: Should the trustee and all beneficiaries unanimously agree to revoke the trust, they can file a consent modification. To learn more about a consent modification, watch this video on Modifying an Irrevocable Trust.

Non-Consenting Modification: If the settlor and only some of the beneficiaries consent to a modification, the matter may be petitioned to an appropriate court where it should be demonstrated that the non-consenting beneficiary(ies) may not be impacted.

Consult Mendes Weed, LLP for Your Trust and Estate Planning Needs

Planning for the future is an important task, and modifying an irrevocable trust needs careful consideration. While revoking a trust may grant you increased flexibility and control over some issues, it could have repercussions you were not expecting.

Be aware of any tax consequences related to modifying or revoking an irrevocable trust. It is worth the time and consideration to consult with an experienced trust and estate planning lawyer if you are thinking of revoking an irrevocable trust.

Mendes Weed, LLP has been helping clients with their trust and estate planning needs, and we would like to help you, too. We have offices in Walnut Creek, Sacramento, and San Francisco. Please contact us today.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

Christina Weed - Taxation Law Specialist

[Video] Modifying an Irrevocable Trust

Trusts

At the Mendes Weed, LLP we aim to provide answers to some of your more sought after questions.

Our last video discussed how to modify a revocable living trust. Today, I’m going to cover a few ways that you might be able to modify a trust that is irrevocable. Perhaps, you need to make a distribution to a certain beneficiary, but it is not permitted; or perhaps, you would like to change the corporate trustee to an individual trustee. There are numerous other reasons you may want to modify the irrevocable trust. If you believe you would like to do so and you believe you have a good reason for doing so, you should meet with a lawyer who practices in this area right away.

First, you will want to review the trust document with your lawyer to find out if the trust itself allows for such a modification and in what circumstances. If not, there are a few other options to consider.

If the settlor and all beneficiaries consent to the modification, they can likely compel a modification; or if all beneficiaries consent to the modification, they can likely comply the modification by petitioning the court.

If the settlor and only some of the beneficiaries consent to the modification, they may be able to compel a modification upon petition to a court and a showing that the non-consenting beneficiaries will not be substantially impaired by the modification.

In some cases, a trustee or beneficiary may want to petition a court to modify or terminate a trust because of changed circumstances. If the changed circumstances were not known or anticipated by the settlor and frustrate a material purpose of the trust, the trust modification or termination may be necessary.

Remember, that it is possible that some of these changes may have an unexpected or unanticipated tax consequence, so it is important to meet with an attorney who is familiar with the relevant tax laws.

Contact our offices if you would like more information.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

Estate Planning Tips: How to Modify an Irrevocable Trust

Trusts

Trusts ensure a secure future for an individual’s family and loved ones. While trusts are geared toward building a secure future in the long term, sometimes laws change and a trust becomes less relevant to modern needs. In that case, trustees may need to modify the terms trust of their trusts. This can be a complex process when the existing trust was established as an irrevocable trust.

When an irrevocable trust is set up, the grantor relinquishes their right to modify or revoke the terms of a trust. This can be done for many reasons, including improving the grantor’s tax liability. If an irrevocable trust needs to be modified, trustees have a variety of options.

Here are some ways that an irrevocable trust can be modified:

Trust Modification by Consent

Tip: Useful when everyone involved wants to modify the trust.

An irrevocable trust can be modified if the grantor and all of the trustees agree on the terms. All parties work with an attorney to file a consent form. This method requires all trustees and the grantor to consent; meaning that a consent form is only valid if the grantor is still living. If a trustee is a minor at the time, their parent or guardian may consent on their behalf.

It is also possible to appoint a “trust protector” who is able to review a trust agreement and advise trustees on what changes they may want to make. This is especially useful, as an attorney can see opportunities or potential problems unique to irrevocable trusts.

If you are looking into modifying an existing trust, it is important that you consult an experienced attorney. Get in touch with Mendes Weed today to start modifying an existing irrevocable trust.

Trust Modification by Court Approval

Tip: Useful when the grantor has died, and the trustees want to modify the trust’s terms.

When the grantor is not able, or is unwilling, to consent to a modification or termination of an irrevocable trust, the trustees can petition the Superior Court. This method requires an experienced attorney to help file the right paperwork, and to keep the modifications in line with the grantor’s intent. Intent is a major factor in how the court decides to approve modifications to an irrevocable trust.

Court approved modifications are best achieved when all trustees agree to the proposed modifications. However, not all trustees must consent. If not all trustees consent, then the court must make their decision based on whether or not the non-consenting parties will be adequately protected.

Tip: In both consent and court approval situations, it is important to show that the modifications are going to support the grantor’s intent.

If you’re ready to talk about modifying an irrevocable trust today, get in touch with Mendes Weed.

Decanting a Trust

Tip: Useful when the existing trust is not able to meet the grantor’s intent or the trustee’s needs, and a new trust should be formed.

Note: Keep in mind that only some states have decanting statutes. Get in contact with an experienced attorney near you for more information.

Decanting is the process of establishing a new trust, transferring funds from the old trust into the new trust, and ensuring that the new trust has favorable terms. In order to decant an existing irrevocable trust, the trustee have discretion over the principal of the trust. Decanting is an increasingly popular method and can be used to expand terms to provide for further generations, allow room for a financial advisor, protect against bankruptcy or divorce, or to manage tax liability.

Decanting a trust can be a complicated process, and it’s crucial that you find an experienced attorney to assist with the process. Are you ready to take a look at your existing trust today? Get in touch with Mendes Weed, LLP.

We serve Walnut Creek, San Ramon, & Danville, as well as the entire East Bay.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

Is an Irrevocable Trust Really Irrevocable?

Cases to Support an Irrevocable Trust

How Can We Revoke an Irrevocable Trust?

Consult Mendes Weed, LLP for Your Trust and Estate Planning Needs

[Video] Modifying an Irrevocable Trust

Estate Planning Tips: How to Modify an Irrevocable Trust

Trust Modification by Consent

Trust Modification by Court Approval

Decanting a Trust

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