Modification and Termination Flashcards
Settlor Modification
Revocable trust (UTC presumption): The settlor has the power to modify the trust.
Irrevocable trust: The settlor cannot amend or terminate the trust. Consent of all beneficiaries, present & future, is needed and the amendment cannot go against the primary purpose of the trust.
Trust Amendments
An amendment to a trust does not have to be executed and comply with the formalities of a will. There are no witness or signature requirements.
Beneficiary Modification
Beneficiaries can modify or terminate a trust when the settlor is deceased and has no more interest and all present and future beneficiaries consent to modify or terminate the trust.
However, Under the Claflin doctrine, a trustee can block a premature trust termination by beneficiaries when a material purpose of the trust has not been completed yet. (Spendthrift trusts intrinsically have an unfulfilled material purpose). Most courts allow the trustee to block the termination if it can be shown that termination would violate the settlor’s intent.
Court Modification
A court may modify a trust under the doctrine of equitable deviation if events that were unanticipated by the settlor have occurred and the changes would further the purposes of the trust. To the extent possible, the modification must be made in accordance with the settlor’s probable intention, and the court need not seek beneficiary consent to make the modification.
Even if circumstances have not changed in an unanticipated manner, a court may modify the terms of a terms of a trust that relate to the management of trust property if continuing the trust on its existing terms would be impracticable, wasteful, or would impair the trust’s administration.
Right of Alienation/ Disclaimer
A beneficiary entitled to distribution is entitled to the right of alienation and can alienate their interest in the trust freely when the trust allows so.
In order to effectively disclaim or not want the benefits of the trust it must be made in writing within nine months from the death of the creator of the trust.
If the disclaimer is effective, the disclaiming party is treated as predeceasing the testator.
Present & Future holder properly disclaims
Present holder: The trust principle becomes immediately distributable or payable to remainder beneficiaries, as long as no one would be harmed by making a distribution to them earlier than it would have been made had the income beneficiary not disclaimed.
If the future holder disclaims then the trust principle with either revert back to the creator of the trust or if and anti-lapse statute applies then it will go to the remainder beneficiaries issues.
Lapse
Under the common law, if a beneficiary dies before the settlor of the trust dies, the gift to the beneficiary lapses (fails).
Anti-Lapse
Under moder
Interlineation
In California, an interlineation (i.e. writing on the face of a will) can constitute both a revocation of an altered provision and a valid new disposition. However, interlineations that change the amount made after the execution of an attested will are not given effect unless they meet the requirements of a holographic codicil.
