Changes to a Trust

Question 1

Killer forfeits interest

Answer 1

Same as wills

Question 2

Voluntary assignment

Answer 2

Absent restrictions by statute or by the trust instrument, a bene may freely transfer his interest in the trust. The assigned interest remains subject to all previous conditions and limitations.

Question 3

Automatic termination of trust

Answer 3

a trust will terminate automatically upon the expiration of the term specified in the instrument or when all of the purposes of the trust have been accomplished or have become unlawful, contrary to public policy, or impossible to achieve.

Question 4

Modification by the Settlor

Answer 4

A settlor can revoke or amend a trust unless the terms expressly state that it is irrevocable.

Question 5

Uneconomic trust

Answer 5

A trustee can terminate a trust if the trust property is less than $50K, and the amount is insufficient to justify the cost of administration, as long as the trustee provides the qualified beneficiaries with notice.

This power to terminate applies to spendthrift trusts unless expressly prohibited.

Question 6

Modification or termination not inconsistent with Settlor’s purpose

Answer 6

A trustee or qualified bene may petition the court to modify an irrevocable trust if:

1. The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill;
2. Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair a material purpose, or
3. A material purpose no longer exists.

Question 7

Modification in Bene’s best interests

Answer 7

The court may also modify an irrevocable trust if compliance with the trust terms is not in the best interests of the benes. The court must exercise its discretion and make modifications that conform to the extent possible with the settlor’s intent, taking into account the current circumstances and best interests of the benes.

This type of judicial modification does not apply if:

1. All beneficial interests must vest or terminate within 21 years after the death of a life in being or within 90 years after its creation, or
2. The terms of the trust expressly prohibit judicial modification.

Question 8

Nonjudicial modification or termination

Answer 8

After the settlor’s death, the trustee and qualified benes may, by unanimous agreement, modify the terms of an irrevocable trust.

Allowed even if trust contains a spendthrift provision, or a provision that prohibits amendment or revocation.

Question 9

Nonjudicial modification does not apply if:

Answer 9

all beneficial interests must vest or terminate no later than 21 years after the death of a life in being or within 90 years after its creation, unless expressly permitted in the trust instrument.