Trust Modification & Termination

Question 1

What are the MAJ/UTC and MIN rules regarding revocability of a trust?

Answer 1

MAJ/UTC: a trust is presumed to revocable unless it expressly states otherwise.

MIN: a trust is presumed to be irrevocablef unless it expressly states otherwise

Question 2

How may a trust be revoked?

Answer 2

Settlor may revoke either by following terms for revocation within the trust itself, or by manifesting a clear and convincing evidence of intent.

Question 3

What is a Trustee’s responsibilty upon revocation of a trust? What if they don’t know it was revoked?

Answer 3

Trustee must deliver trust property as settlor directs; if Trustee doesn’t know it was revoked (or amended), he is NOT liable for distributions or other actions.

Question 4

In what 3 ways will a trust automatically terminate?

Answer 4

1. It expires per terms in trust
2. no trust property remains
3. the purpose of the trust becomes unlawful, contrary to public policy or impossible.

Question 5

How and when can a irrevocable NON-charitable trust be terminated or modified?

Answer 5

NO material purpose violation: consent of all bene’s if continuance is not necessary to acheive any material purpose or the modification isn’t inconsistent with the material purpose.

Material Purpose violation: all bene’s AND settlor must agree

Question 6

How and why can a judicial modification, reformation or termination occur?

Answer 6

Court can, without seeking bene consent if:
1. due to unanticipated circumstances or an inability to manage the trust effectively, or if the trust is uneconomic; OR

2. to correct mistakes or achieve the settler’s tax objectives.