Trust Modification

Question 1

Generally, who can modify a trust?

Answer 1

1. The settlor
2. The court
3. The trustee
4. The beneficiary

Question 2

When does a trust terminate?

Answer 2

When its purpose has been accomplished OR at the expiration of an expressly stated trust term.

Question 3

When can a trustee block premature termination?

Answer 3

If the trust is shown to have an unfilfilled material purpose.

Question 4

What types of trusts will intrinsically have unfilfilled material purposes?

Answer 4

1. Discretionary trusts
2. Support trusts
3. Age-dependent trusts
4. Spendthrift trusts (presumptively)

Question 5

How can a beneficiary modify a trust?

Answer 5

1. Ask the court to modify or terminate the trust.
2. Modification/termination cannot frustrate a material purpose of the trust.
3. Must have consent of all beneficiaries. AND
4. Cannot modify the trust to give themselves power to change the trustee without court approval.

Question 6

When can a settlor modify or terminate a trust?

Answer 6

Any time unless the trust is expressly irrevocable.

Question 7

What happens when a settlor terminates a trust?

Answer 7

The trustee must distribute the property per the settlor’s instructions.

Question 8

Can a trust be terminated by will?

Answer 8

Only if the trust expressly provides that a trust may be terminated by will.

Question 9

When can the court modify a trust?

Answer 9

• When unanticipated events have cause the trust’s purpose to be frustrated by its terms.
• When all beneficiaries consent and no material purpose of the trust is frustrated. (Even if settlor objects!)
• To accellerate vested rights.
• To reform the terms of the trust when the settlor’s intent is established by clear and convincing evidence.

Question 10

When can a court prematurely terminate a trust?

Answer 10

• If the trust purpose has been achieved or has become illegal, impracticable, or impossible.
  
  • Assets will be distributed in accordance with the trust purpose.
• With the consent of all beneficiaries, if no material purpose of the trust is frustrated (even if the settlor objects)

Question 11

When can a trustee terminate the trust?

Answer 11

Only if

• The trustee gives sixty days’ written notice of the intent to terminate to the beneficiaries AND EITHER
• The trust instrument contains express termination provisions OR
• The value of the trust is insufficient to justify the costs of administering it.