Trust Modification & Termination Flashcards
What is the presumption of revocability?
UTC (majority): trust presumed revocable unless expressly stated otherwise Common Law (minority): trust presumed irrevocable, unless expressly stated otherwise
How can a Settlor revoke a trust?
(1) By compliance with method provided in trust instrument
(2) If method not provided, by: (a) later document expressly refers to the trust or specifically devise property that otherwise would’ve been past according to the terms of the trust; (b) or any other method manifest and clear and convincing evidence of the settlers intend to revoke.
When does the trust automatically terminate?
When the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public colicy, or if impossible to achieve, the trust is automatically terminated.
Can a noncharitable, irrevocable trust be terminated or modified?
Yes, if all beneficiaries consent, and a quart conclude that continuance is not necessary to achieve any material purpose of the trust or that modification is not inconsistent with the material purpose of the trust. Consent of the settlor or trustee is not required.
When does the trust have a material purpose?
Typically when a trust has a spend thrift provision, a discretionary distribution provision, a distribution provision key to the support of a beneficiary, a postponement of enjoyment provision (B must reach specific age), or a future interest.
Can a trust be terminated if the termination is inconsistent with the material purpose of the trust?
Yes, if there is consent by all beneficiaries and the settlor. Consent of the trustee is not required.
What is the Claflin doctrine?
Enables a trustee of a noncharitable, irrepricable trusts to block a premature trust termination, even one to which all beneficiaries have consented, if the trust is shown to have an unfulfilled material purpose unless the settler is alive and also consents to the termination.
How was trust property distributed if the trust has been terminated?
The trustee must distribute the property as agreed by the beneficiaries, even if that distribution does not comport with the terms of the trust.
When can a court modify or terminate a trust?
When there have been unintanticipatated changes, an inability to administer the trust effectively, if the trust is uneconomic, or to correct mistakes or achieve the settlers tax objectives. Consent of the beneficiaries is not required.
How is a former spouses’s trust interest treated upon divorce?
UTC: treat former spouse as having disclaimed
Common Law: not revoked upon divorce
Modern Trend: treat as revoked, like a will
