Modifying and Terminating the Trust Flashcards
In general, when will a trust terminate?
Automatically on the expiration of the specified term or when all purposes of the trust have been accomplished or become impossible, unlawful, or contrary to public policy
Can a settlor revoke or amend a trust?
Under the UTC: Yes, unless the terms expressly state that it is irrevocable.
Common law: No, unless the settlor expressly reserved the power to do so.
Can the beneficiary terminate or modify the trust?
A trust may be terminated or modified on the consent of settlor (or agent/conservator/guardian) and all beneficiaries, even if the modification or termination conflicts with the trust’s material purpose.
A trust may be terminated/modified on the consent of all the beneficiaries without the settlor but only if no material purpose of the trust would be frustrated.
The “all beneficiaries” requirement INCLUDES unborn and unascertained beneficiaries (through party appointed to act in their interest) and beneficiaries of future interests no matter how remote or contingent.
May the court modify or terminate a trust?
A court may terminate/modify if (1) the trust could have been modified if all beneficiaries had consented; and (2) the interests of any nonconsenting beneficiaries will be adequately protected. The court may also terminate/modify if (1) unanticipated circumstances threaten the trust purpose; (2) continuation is impracticable or wasteful or (3) the value is insufficient to justify the cost of administration
What kind of material trust purpose will prevent a beneficiary from terminating a trust?
Indicators of material purposes preventing beneficiaries from terminating/modifying a trust are (1) distributing property to a trust beneficiary at a designated age, showing a purpose to keep the property out of their hands prior to that; (2) a spendthrift provision, showing purpose of protecting the beneficiary from creditors
What must the trustee do if the trust is terminated by the agreement of all trust beneficiaries?
The trustee must distribute the property as agreed by the trustees. The trustee will not be liable for accommodating the beneficiaries’ unanimous termination even if it violates a material purpose of the settlor
Is the objection of the settlor a bar to beneficiaries terminating?
No, but may be evidence that the material purpose is frustrated
Can a court reform the terms of a trust to fix a mistake?
A court may reform a trust’s terms to reflect settlor intent if a mistake is shown by clear and convincing evidence
Can the trustee terminate a trust?
if the trust property is less than $50000 and the amount is insufficient to justify the cost of administration (with notice to qualified beneficiaries)
Can the trustee combine or divide trusts?
The trustee can combine or divide trusts provided that it will not frustrate any purposes of the trust or impair the rights of any beneficiary. They must give the qualified beneficiaries notice but do not need their consent.
