Can Irrevocable Trusts be Undone or Changed?
Irrevocable trusts can sometimes be revoked and or amended. If anyone has an irrevocable trust that relates to them or their family planning, there are circumstances when these arrangements can be undone and or modified. Petitions to terminate such a trust or modify such a trust can be based a number of reasons: change of circumstances, by consent of all parties, for tax reasons, to name a few.
Let’s say Joe inherited assets in a trust for his benefit. He is the trustee and the primary beneficiary. He has full control of the funds but in the event that he was sued the assets would be protected and the funds won’t be taxed in his estate and will pass outside of probate. The trust says that the remainder interest (unspent funds), if any, when Joe passes is to go to his children. Joe’s wife, Mabel, and Joe would prefer that Mabel would benefit if she survived Joe. Then after Mabel passes, they want the assets to go to Joe’s children. Can Joe modify his trust to accomplish security for Mabel? Yes, if all interested parties consented or other reasons alluded to above were appropriately demonstrated.
Another reason to modify a trust would be because it left assets “free of trust” and unprotected. We have successfully modified trusts with court approval to ensure assets will be left protected “in trust”. The point is that irrevocable trusts can be modified and sometimes revoked if conditions are met. Every case is unique and it is always advisable to obtain professional assistance with these profoundly important matters.
Contributed by Mark F. Winn, J.D., LL.M. in Estate Planning, who is a local tax, asset protection and estate planning attorney.