Modification or Termination of Trusts

Question 1

In general, when does a trust exterminate?

Answer 1

Upon the expiration of the term specified in the instrument or when all of the purposes of the trust have been accomplished or have become unlawful, contrary to public policy, or impossible.

Question 2

Can a settlor (or agent thereof) revoke or amend a trust?

Answer 2

Yes, if the trust was created on or after July 1, 2006 and the terms do not provide otherwise

Question 3

How can a trust be revoked or modified be beneficiaries?

Answer 3

Upon the consent of the settlor (or agent thereof) and ALL beneficiaries, even if the modification or termination conflicts with a material trust purpose

Upon the consent of only all beneficiaries, but only if no material purpose of the trust would be frustrated

Question 4

When can a court revoke or modify a trust?

Answer 4

1) If unanticipated circumstances threaten the purposes of the trust or continuation of the trust on its existing terms is impracticable or wasteful
2) When all beneficiaries do not or cannot consent, and (a) the the trust could have been modified; and (b) the interests of any non consenting beneficiaries will be adequately protected;
3) to achieve the settlor’s tax objectives;
4) To correct a mistake in the terms (shown by clear and convincing mistake)

Question 5

When can a trustee revoke a trust?

Can a trustee combine several trusts into one trust or divide one trust into several trusts?

Answer 5

If the trust property is less than $100K and the amount is insufficient to justify the cost of administration, provided that all beneficiaries receive notice.

Yes, provided doing so does not frustrate any purposes of the trusts or impair the rights of any beneficiary. Doesn’t need consent, but must give notice.