5. Modification/Termination

Question 1

What is required for automatic termination of trusts?

Answer 1

Term expiration

Accomplishment of all purposes

Unlawful purpose

Contrary to public policy

Impossible to achieve

Question 2

What is required for Settlor to modify/terminate a trust?

Answer 2

Expressly reserved power to revoke/modify (one includes the other) (UTC + most states)

NOT expressly stated ‘irrevocable’ (UTC)

Question 3

What is required for Trustee to modify/terminate a trust?

Answer 3

Uneconomic trust

1) Property < $50,000
2) Property not sufficient to justify admin costs
3) Trustee notifies Beneficiaries

Combine/Divide trusts

1) NOT frustrate trust purposes
2) NOT impair beneficiaries’ rights
3) Trustee notifies Beneficiaries

Question 4

What is required for Beneficiary to modify/terminate a trust?

Answer 4

1) ALL beneficiaries’ consent
- Remaindermen
- Born + Unborn
- Unascertained (must appoint legal reps)

2) Either;
- Settlor’s consent
- NOT frustrate material purpose (Spendthrift provision/depends on court’s view if purpose is unclear)

Question 5

What must Trustee do after modifying/terminating a trust?

Answer 5

Distribute as agreed by Beneficiaries

Question 6

What is required for Court to modify/terminate a trust?

Answer 6

NOT ALL beneficiaries can consent

• Trust could be modified if they all consented
• Court could adequately protect their interests

Unanticipated circumstances threatening trust purpose (equitable deviation from trust)

Impracticable/Wasteful purpose

Trust value not sufficient to justify admin costs

Question 7

What provisions in the trust may Court modify?

Answer 7

Administrative provisions (management of property)

Dispositive provisions

• UTC: Yes (modification must further Settlor’s purpose)
• Common law: No