Modification and Termination of Trusts

Question 1

Can a trust be modified by the trustee or beneficiary?

Answer 1

Generally, no. It is appropriate only when the objectives of the trust would be defeated or substantially impaired if not modified.

Question 2

What is the two-level modification test?

Answer 2

1. Settlor’s primary intent

2. Will specific directions now frustrate that intent?

Question 3

Can a trust be modified when the income payout is insufficient to carry out the settlor’s intent?

Answer 3

Yes, the court can invade the principle to meet this objective.

Question 4

Can a trust be terminated?

Answer 4

Yes

Question 5

Who can terminate a trust?

Answer 5

The settlor (creator of the trust)

Question 6

What is the default rule in NY for amending / terminating a trust?

Answer 6

Trusts are irrevocable and unamendable unless the power to revoke and amend is expressly reserved in the trust instrument

Question 7

When can an irrevocable trust be terminated by the settlor?

Answer 7

When all beneficiaries in being consent (no one can consent for minors or incompetents)

Question 8

Are heirs or next of kin considered beneficiaries required to give consent to terminate an otherwise irrevocable trust?

Answer 8

No. They cannot be properly ascertained until the decedent’s death.