Modification and Termination of Trusts

Question 1

Revocable trust

Answer 1

modifiable or terminable by the settlor at any time

Question 2

Irrevocable trust - the settlor and all beneficiaries consent

Answer 2

A court CAN order a modification or termination even if the modification or termination is inconsistent with a material purpose of the trust.

Question 3

Irrevocable trust - all of the beneficiaries consent, but not the settlor (because of objection or has died)

Answer 3

The court MAY order a modification NOT inconsistent with a material purpose of the trust or termination if the continuance of the trust is not necessary to achieve any material purpose.

Question 4

A court may modify or terminate a trust without the consent of the settlor or of all beneficiaries in these situations:

Answer 4

(1) unanticipated circumstances
(2) tax advantages
(3) purposes (unlawful, contrary to public policy, or impossible to achieve)
(4) uneconomic

Question 5

The court may reform the terms of a trust, even if the terms are unambiguous, if it is…

Answer 5

proved by clear and convincing evidence that both the settlor’s intent and the trust terms were affected by a mistake of fact or law.