Termination and Modification of Trusts

Question 1

Which parties can modify the trust?

Answer 1

1. by settlor
2. by beneficiaries
3. by court

Question 2

Modification by settlor

Answer 2

implied from the power to revoke

Question 3

Modification by beneficiaries

Answer 3

unanimous consent
AND
does not frustrate any material trust purpose

Question 4

Modification by court

Answer 4

(1) Cy pres doctrine for charitable trusts

(2) Changed circumstances:
- unknown and unanticipated changed circumstances;
AND
- continuing under existing terms would impair trusts’ purposes

Question 5

Termination of Revocable Trusts

Answer 5

If trust is silent, cts are split on whether revocable by settlor or not

Maj. view = presumed irrevocable, unless

(1) settlor reserved right to revoke; AND
(2) complies w/ provisions in trust agreement

Min. view: presumed revocable unless trust expressly states irrevocable

Question 6

Termination of Irrevocable Trusts

Answer 6

3 ways in which even an expressly irrevocable trust can be terminated early:

(1) unanimous election by settlor and all beneficiaries
(2) the Clarflin doctrine: all beneficiaries agree; and no further material trust purpose
(3) merger

(?) operation of law = passive trusts and the statute of uses

Question 7

Changed circumstances for modification by court

Answer 7

at the request of a trustee/beneficiary, a ct may modify a trust due to changed circumstances unknown to and unanticipated by the settlor and continuation under existing terms would impair the initial purposes of the trust

(1) unknown and unanticipated changed circumstances;
AND
(2) continuing under existing terms would impair trusts’ purposes (i.e. deviation required to save trust)

Question 8

The Clarflin doctrine

for the termination of irrevocable trusts

Answer 8

permits termination of irrevocable trust can be terminated early if

(1) all beneficiaries agree; and
(2) no further material trust purpose

Question 9

Termination of spendthrift trust?

Answer 9

No, even if all parties agree

Question 10

Merger (for termination of irrevocable trusts)

Answer 10

if the sole trustee becomes the sole beneficiary, the trust interests “merge,” and the trust terminates

Question 11

Judicial power to terminate

Answer 11

ct has power to terminate a trust early if the trust’s purpose has become

• impossible
• illegal
• completed