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.
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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.
Mendes Weed, LLP is located in Walnut Creek and serves clients around the Bay Area. For your convenience, we also have offices in OAKLAND and Sacramento by appointment only.
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