Modification and early termination of trusts

Question 1

Changed circumstances

Answer 1

on petition of trustee or ben, COURT may modify or terminate trust if

b/c of changed circumstances not anticipated by settlor (purpose fulfilled, purpose become illegal, purpose become impossible to fulfill), modification or term WILL FURTHER THE PURPOSES OF THE TRUST

Question 2

Even if no changed circumstances, with consent of trustee and qualified beneficiaries, COURT can MODIFY if the modification…

Answer 2

is not inconsistent with a material trust purpose

Question 3

Even if no changed circumstances, with consent of trustee and qualified beneficiaries, COURT can TERMINATE if the continuance of the trust is…

Answer 3

not necessary to achieve any material trust purpose

Question 4

Who is a qualified beneficiary?

Answer 4

bens who are: permissible distributees of trust income and principal

or would be distributees if the trust terminated on that date

Question 5

Uneconomic trust rule (4 parts)

Answer 5

• if value of trust less than $50k or some UTC states $100k
• upon NOTICE to qualified bens
• the Trustee can terminate a trust WITHOUT COURT APPROVAL
• if trustee concludes that trust’s value is insufficient to justify the ADMIN costs

Question 6

Uneconomic trust: even if trust value greater than 50k or 100k, trustee can modify or terminate trust, or remove trustee and appoint a less expensive successor trustee if trustee determines that..

Answer 6

value of trust property is insufficient to justify the cost of administration

Question 7

Reformation to correct mistakes or achieve tax objective: COURT may reform the terms of a trust if it is proved…

Answer 7

by clear and convincing evidence that both the settlor’s INTENT and the trust TERMS were affected by a mistake of fact or law

can also modify terms of a trust to achieve settlor’s tax objectives