(7) Trusts: Modifications & Revocations

Question 1

Modification of a Trust - by Settlor

Answer 1

A trust may only be modified by a settlor (a) who expressly reserved the power to modify the trust OR (b) who has the power to revoke the trust (the power to revoke includes the power to amend) (i.e., a revocable trust).

Question 2

Modification of a Trust - by a Court

Answer 2

A trust may also be modified when (1) a court finds trust modifications necessary to preserve the trust due to unforeseen circumstances; (2) all beneficiaries consent and the court determines the modification is not inconsistent with the trust purpose; (3) Cy pres doctrine.

Question 3

Termination of an Irrevocable Trust

Answer 3

An irrevocable trust may be terminated if (a) the settlor and all of the beneficiaries agree to do so while the settlor is still alive; (b) all of the beneficiaries agree and it will not frustrate the purpose of the trust; OR (c) by operation of law through merger or through a passive trust.

Question 4

Merger

Termination of a Irrevocable Trust

Answer 4

A Merger – occurs when the trustee has become the sole beneficiary

Question 5

Passive Trust

Termination of a Irrevocable Trust

Answer 5

A Passive Trust – occurs when all trust property has been transferred to the beneficiary.

Question 6

Termination of a Revocable Trust

Answer 6

A revocable trust may be revoked by (a) compliance with any method of revocation provided in the trust instrument; or (b) if the trust instrument is silent on how to revoke, a writing signed by the settlor that is delivered to either the trustee during the lifetime of the settlor (the signed writing cant be a will).