Amending an Irrevocable Trust

By Tom Streissguth

There are many reasons for amending a trust. Circumstances may have changed and the distribution to beneficiaries is no longer appropriate, or even ill-advised. You may even find the trust contains errors that you didn’t spot when the documents were originally created. Although an irrevocable trust, by legal definition, cannot be amended, there are circumstances that do allow changes as well as legal methods that can change how the trust -- or a new one -- earns and distributes its income. Although many rules apply generally, state law governs the creation and amendment of trusts. It's best to consult an experienced estate-law attorney or financial adviser to ensure the changes to your trust comply with your state laws.

Step 1

Contact your beneficiaries and your trustee. Under the laws of your state, you may be able to amend a trust with the consent of the trustee and all beneficiaries of the trust. This would require written agreements from everyone involved. In some states, such as California, modification under these circumstances does not require court approval.

Step 2

Draw up a second trust, if this course of action is better suited to your desired outcome than simply amending the old trust with the consent of all parties. This is known as a "decanting" trust, in which your trustee distributes assets from the old trust into the new one that contains revised goals and instructions. The second trust may contain a new arrangement of beneficiaries that will be subject to state law. There will also be tax consequences for any assets sold or transferred into the new trust.

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Step 3

Sell interest in a business or property out of the first trust to a new trust, which then benefits from all the gain in value of the business or property. Your trustee must have discretionary power to carry out this step. The first trust retains its irrevocable terms, but the second trust becomes the vehicle for distributing the business share and the growth in its value among its named beneficiaries.

Step 4

Petition the court to allow an amendment to the original trust, if you can show that a "scrivener's error" occurred when the trust was originally set down, or that you did not understand the terms of the trust when you signed it. You do not need direct consent of the beneficiaries to take this step, but the beneficiaries do have the right to raise an objection to the amendment. If the beneficiaries do not agree to the amendment, the modification must be reviewed and approved by the court.

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How to Amend a Trust to Reinstate Prior Provisions
 

References

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Amending an Irrevocable Trust Agreement & Uniform Trust Code

Trust law varies based on the state where the trust is located. The Uniform Trust Code (UTC) is a proposed law meant to be enacted across the country to promote legal consistency regarding trusts. The UTC has been enacted in 23 states and covers most trust issues, including how to amend an irrevocable trust agreement. Under the UTC, an irrevocable trust agreement can be amended when the beneficiaries and creator agree to an amendment or when there is a significant change in circumstances surrounding the trust. When attempting to amend an irrevocable trust agreement, consider consulting with a licensed attorney.

How Do You Remove the Executor of a Living Trust?

The executor of a living trust, normally known as the trustee, is vested with the power to administer trust assets on behalf of the trust beneficiaries in conformity with the terms of the trust deed. The ease with which he can be removed from his position depends on a number of factors, including whether the trust is revocable or irrevocable.

What Are the Duties of a Successor Trustee for Administrating a Living Trust?

A successor trustee does not have any duties until the trustee can no longer perform his duties. A trustee is a person responsible for managing the affairs of a trust and distributing assets. There are two types of trusts: revocable and irrevocable. With a revocable trust, the person who created the trust, known as the grantor, retains control of the trust and can modify or terminate the trust at any time. The grantor typically is the trustee of a revocable trust. In contrast, the grantor cannot be the trustee of an irrevocable trust, which cannot be modified or terminated by the grantor without permission from all the beneficiaries.

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