Trusts - Modification and Termination of Trusts Flashcards
Methods of Modification or Termination
1) BY EXPRESS TERMS OF TRUST By the terms of the trust. This is the most common way a trust ends–by its own terms, expressly. Could end upon a person’s death, reaching an age, or satisfying a condition or stated date.
2) BY SETTLOR (UNLESS IRREVOCABLE). This is a commonly tested topic. General rule under modern law is settlor may modify or revoke trust in any way settlor wants for any or no reason unless the trust expressly restricts the trustee’s ability to do so by making the trust irrevocable. A silent trust is presumed revocable nowadays. Can you still revoke an irrevocable trust? Sometimes settlor can do that upon written consent of all living people with vested and contingent interests. Maybe hard to do and some jurisdictions just say no. If trying to revoke an irrevocable trust, gotta say “no but maybe if you got consent of everyone and state allowed it you could”.
3) BY AGREEMENT OF ALL BENEFICIARIES IF SETTLOR INTENT NOT FRUSTRATED Also, the modification must not interfere with a material purpose of the trust (this is called the Claflin rule). Must ascertain what types of purposes are material. What are some provisions of a trust that would prevent beneficiaries from modifying or terminating even if all beneficiaries agreed?
These are the provisions preventing termination by beneficiaries:
- support provisions
- spendthrift provisions
- payment at certain ages
- payment at certain dates
- discretionary trust provisions
4) BY OPERATION OF LAW if trust exhausted or merger of title. If you run out of money, no more trust to have. Can’t have trust without property. Or if legal and equitable title comes together that’s merger. That ends it too.
5) BY COURT. A court can terminate or modify a trust if the court believes the purposes have been accomplished or become illegal or become impossible to fulfill.
ProvisionPreventing Termination by Beneficiaries
- support provisions
- spendthrift provisions
- payment at certain ages
- payment at certain dates
- discretionary trust provisions
