Fiduciary & Trust #7 Trust Alteration Or Termination

Question 1

UTC Section 111

Answer 1

Interested parties may enter into binding nonjudicial settlement agreement to alter any trust matter as long as it doesn’t violate material purpose of trust

Modification of NONMATERIAL TERMS

Question 2

Modification of Material Terms

Answer 2

1) Consent of settlor and all beneficiaries
2) Consent of all beneficiaries-as long change is not inconsistent with material purpose of trust
3) Without consent, as long as interest of beneficiaries adequately protected
4) Further purpose of trust
5) Correct mistake
6) Tax objective

Question 3

Cy Pres

Answer 3

Court has power to order funds of charitable trust be applied to different charitable purpose if accomplishment of literal terms of the trust unlawful, impossible, impractical, inexpedient

State attorney general involved to protect rights of the public

Question 4

Ways to terminate a trust

Answer 4

1) according to terms of the trust
2) court rules that there was a mistake in trusts creation. ( fraud/undue influence)
3) trusts purpose has been accomplished and all parties consent to termination

Question 5

Decanting

Answer 5

• certain circumstances
• trustee appoints income and/or principal of one trust to second trust
• second trust may have different terms ( tax advantages, modern administration, situs)
• no court or beneficiary approval needed

Question 6

Estate/Gift tax implications of decanting

Answer 6

Decanting can be used to modify GST Exempt trust and keep GST favored status

May be considered imputed gift if beneficiaries interest are reduced

Question 7

Income Tax implications of decanting

Answer 7

May be used to eliminate state income tax