Irrevocable Family Trust Laws in Massachusetts

By Wayne Thomas

An irrevocable family trust can be effective estate planning tool. When an individual establishes this type of trust, he appoints an individual, known as a trustee, to oversee the administration of the trust. In Massachusetts, specific rules apply to the trustee. State law also sets forth the limited circumstances for the modification or termination of the trust. Understanding the state laws that apply to irrevocable family trusts will help ensure the proper distribution of property held in the trust.

Overview of Irrevocable Family Trusts

An irrevocable family trust involves the holding of property for the benefit of one or more relatives. The person creating the trust, referred to as the settlor, has complete discretion in determining which family members to include in the trust; these persons are referred to as the beneficiaries. The settlor deposits property into the trust, which is then distributed to the beneficiaries by the trustee according to the specific instructions as described in a written trust instrument. The trust is said to be irrevocable because the settlor has no authority to modify or terminate the trust after its creation.

Notice

Once an irrevocable family trust is created, Massachusetts law requires that the trustee keep the beneficiaries informed. Specifically, within 30 days after his appointment, the trustee must provide his name and address to the beneficiaries listed in the trust instrument. The trustee is also required to furnish a statement of accounting covering all trust property to the beneficiaries on a yearly basis, or upon request. Failure to follow the notice requirement can result in removal of the trustee.

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Modification and Termination

In Massachusetts, if all beneficiaries and the settlor consent, the trust instrument may be modified or terminated even if the action conflicts with the reason the trust was created, referred to as the "material purpose" of the trust. An example might be a trust created to support a settlor's children through college. If all parties agree, the trust could be modified or terminated while a beneficiary is still in school. In addition, the court may allow the modification or termination without the consent of all the beneficiaries if the court is satisfied that the interests of any non-consenting beneficiary are protected. An example might be if the beneficiary still in college has sufficient resources to support himself. In addition, state law allows modification or termination of the trust without the consent of the settlor, provided all beneficiaries consent and the change does not conflict with the material purpose of the trust.

Uneconomical Trust

Massachusetts law also allows the termination of an irrevocable family if the total value of the trust is so low that continuing to operate the trust becomes impractical. By law, a trustee is authorized to terminate a trust if its value is less than $200,000 and the administrative costs make it no longer possible to effectively carry out the trust's terms. In addition, a judge may terminate a trust or order appointment of a new trustee for a trust of any value if the court determines that the administrative costs relative to the value of the trust require this action.

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Does an Irrevocable Trust Automatically Terminate Upon a Certain Date?
 

References

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The Responsibilities of the Trustee for a Living Trust in Indiana

A trust is an estate planning document that transfers property of the trust's creator, known as the “settlor,” to the trustee for the benefit of a beneficiary named in the trust document. A trust is considered a living trust when it is created and takes effect during the settlor’s lifetime. A living trust can either be revocable or irrevocable. In a revocable living trust, the settlor can amend or revoke the trust anytime during his lifetime. In Indiana, the trustee's duties are set forth in the Indiana Trust Code.

What Happens When a Revocable Trust Ceases?

Revocable trusts are often used as estate planning tools. Unlike wills, the administration of trusts after death can usually be done without going to probate court. Once the creditors and taxes are paid, any remaining trust assets are distributed according to the trust creator's instructions. However, state laws vary as to what is required to wind up a revocable trust, which can affect how long the process will take.

What if You Violated an Irrevocable Trust?

The person appointed to oversee an irrevocable trust must act according to the terms of the trust and in the best interest of those who benefit under the trust. While all states recognize this duty, the type of recourse available in cases of breach can vary. Knowing when you may petition the court for removal of a trustee and when he may be personally liable for financial losses will help ensure that your trust operates according to the wishes of its creator.

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