Trusts: modification and termination Flashcards
Revocable trust: settlor’s power to revoke or amend
If a settlor of a trust retains the power to revoke a trust, she also has the power to modify or amend a trust.
In the absence of such a reservation, modification or termination can only occur:
(1) With the consent of all beneficiaries; and
(2) if the proposed change will not interfere with a primary purpose of the trust.
Revocable trust
A revocable trust can be terminated by the settlor at any time. By contrast, an irrevocable trust usually cannot be terminated.
(1) Majority rule: A trust is presumed to be irrevocable unless it expressly states otherwise.
(2) Uniform Trust Code and minority approach: A trust is presumed revocable unless it expressly states that it is irrevocable.
Termination: beneficiaries
A trust only terminates automatically when the trust purpose has been accomplished.
Alternatively, a trust may terminate if:
(1) The settlor is deceased or has no remaining interest; and
(2) All the beneficiaries, including income and remainder beneficiaries, consent.
But a trustee may block a premature trust termination by the beneficiaries if the trust is shown to have an unfulfilled material purpose (“Claflin doctrine”).
Termination: trustee
A trustee has no power to terminate unless the trust so specifies in express provisions.
Removal of a trustee
A court can remove a trustee if the purpose of the trust would be frustrated by the trustee’s continuance in office or if the trustee violated a duty.
Termination: Claflin doctrine
A trustee may block a premature trust termination by the beneficiaries if the trust is shown to have an unfulfilled material purpose—e.g., if the settlor provided for successive interests (present and future beneficiaries).
The Claflin doctrine applies to:
(a) Discretionary trusts;
(b) Support trusts;
(c) Age-dependent trusts.
Modification: equitable deviation
A court may modify a trust under the doctrine of equitable deviation if:
(1) events that were unanticipated by the trustee have occurred; and
(2) the changes would further the purposes of the trust.
Merger
The trustee holds the legal interest or title to the trust property, whereas the beneficiary holds equitable title to the property.
Upon termination of the trust, title merges and vests in the beneficiaries.
Revocable trust: method of revocation or modification
Absent language within the instrument prescribing the method of revocation or modification, any action manifesting the settlor’s intent to modify or revoke will suffice.
