What's an irrevocable trust? Are we stuck with what this 40-year-old document says?
Probably the most common type of trust used in estate planning is the revocable living trust. But clients also use irrevocable living trusts to lock in certain tax treatment or to protect the assets that were put in the trust. Also, revocable trusts usually become irrevocable on the death of the grantor of the trust (the person who set it up).
But irrevocable doesn't mean unchangeable and there are lots of ways that an irrevocable trust could be changed:
- The trustee almost always has the power to sell the trust assets. The purchase price, of course, goes back in the hands of the trustee. But the property itself is not necessarily tied up in the trust.
- Many trust agreements have provisions built in that allow a person or group of persons to move the trust property into another trust with different terms. Lawyers call this “decanting the trust” – like pouring the wine out of an old bottle with a damaged cork into a fresh clean container.
- Nonjudicial settlement agreements. Certain changes can be made simply by agreement among all of the interested parties, but these are limited to administrative matters.
Legal proceedings to modify or terminate a trust. Michigan's Trust Code allows the probate court to change a trust if:
- the trustee and beneficiaries agree, and the change is consistent with the purposes of the trust
- its existing terms would be impracticable or wasteful or impair the trust's administration, or
- because of circumstances not anticipated by the grantor, modification will further the trust's purpose or the grantor's probable intention
The attorneys at Lex Novus PLC are experienced at modifying or terminating irrevocable trusts. Hit the link to contact us to schedule a consultation.