The key factor in an irrevocable trust is right there in the title – irrevocable. That means that, as you would expect, the trust cannot be revoked, right?
Well, as they say, for every rule, there is an exception. And irrevocable trusts are, without being too confusing, no exception to the rule. Simply stated, irrevocable trusts are generally irrevocable, but there are times when they can be amended, if not revoked outright.
Accordingly, the truth about irrevocable trusts is that they are not so rigid that they cannot be changed, or even effectively revoked, in some circumstances.
Does that mean, however, that you cannot put your faith in the irrevocability of an irrevocable trust? No, you can certainly rely on the fact that irrevocable trusts have that feature that makes them so attractive, that they cannot be – or rather it takes some doing before they can be – changed.
So, if you are curious about the question: can an irrevocable trust be amended? Then, you are in the right place. This blog will discuss the basics of what an irrevocable trust is, and then cover the exceptional circumstances when an irrevocable trust can be amended.
You should note, trust can be tricky financial instruments. Accordingly, you would be well served to have an experienced trust and estate planning attorney help you with managing an irrevocable trust. For that kind of help, please consult with us at Doane & Doane. We are the estate planning attorneys with a great reputation in Palm Beach, FL. We understand the nuances of irrevocable trusts, and we can advise you on how to effectively manage your assets so your hard-earned money can go to the ones you love.
We invite you to contact us to understand how vital it is to begin your estate planning if you have not done so already. You can reach Doane & Doane professionals by calling 561-656-0200. Now, let’s learn more about the question, “Can you amend an irrevocable trust?”
The Irrevocable Trust – The Basics
There are two types of trusts – revocable and irrevocable. In either case, the person who creates a trust is called “the grantor.”
With a revocable trust, the grantor is the person who manages the assets in the trust, and thus the grantor is also the “the trustee.” In that circumstance, the grantor of a revocable trust still owns the property or assets that are placed in the trust, and thus maintains the right to claw back those assets. Given that the grantor has the power over the trust assets, that means that he or she must pay to continue to pay taxes on trust income.
That is where an irrevocable trust can prove invaluable. When assets are placed in an irrevocable trust, the grantor does not have to pay taxes on the income earned from trust assets. That makes irrevocable trust a very attractive financial instrument.
However, the cost of getting that tax avoidance benefit is that the grantor relinquishes control over the trust assets. In other words, the grantor of an irrevocable trust cannot be the trustee. The grantor merely funds the irrevocable trust with assets and then appoints a trustee to manage the assets. The grantor effectively steps away from the irrevocable trust after it is created, because the trust assets are no longer the property of the grantor.
Why Would Someone Want an Irrevocable Trust?
The main reason why a person would want his assets in a trust that cannot be revoked is to benefit charity, or provide financial assurance to loved ones after the grantor passes away.
In that vein, there are a number of different types of irrevocable trusts. There is a bypass trust that holds the assets in the trust for the benefit of a surviving spouse after the grantor passes away.
There is a special needs trust in order to provide financial support to a disabled person, should that person lose governmental support when he or she inherits money upon the grantor’s death.
Finally, there is a charitable trust that is available to give the grantor’s assets to charity in a manner desired by the grantor.
The Four Ways Where You Can You Amend an Irrevocable Trust
As noted, a grantor loses the ability to control an irrevocable trust once it is created. But there are five special circumstances in which a change is possible.
First, a court may modify the terms of an irrevocable trust. Should trust become an unreasonable financial strain, or if the purpose of the trust has vanished (for example, a charity earmarked to receive trust assets no longer exists) then a court of competent jurisdiction may order a modification to the trust. A trustee or trust beneficiary may petition the court for the change.
Second, the trust documents themselves may contain instructions on how the trust can legally be modified. In some cases, the trustee is given the “power of appointment” to use discretion in making amendments to the trust.
Third, some trusts allow for a trust protector, who is a person permitted to approve or deny trust amendments. This person is typically an independent third party, appointed by the trustee, the court, or trust beneficiaries.
Finally, an irrevocable trust can be terminated by simply draining the trust of the assets in it. That effectively leaves the trust as an empty shell, which in fact terminates the trust.
Set Up an Irrevocable Trust with Doane & Doane
Can you amend an irrevocable trust?” call the expert attorneys at Doane & Doane. We at Doane & Doane combine big firm resources and experience with the personal touch of a small, boutique firm. We pride ourselves on offering the kind of one-on-one attention that clients at big firms often do not enjoy.
After almost two decades of practice, we have earned the reputation as one of West Palm Beach’s most prominent tax and estate planning law firms. In particular, we understand that estate and probate matters involve a great deal of emotion. We are privileged to help clients on such important matters, and we genuinely care for and support our clients and their families. Our friendly staff and atmosphere are vital to the quality of client service we provide.
We hope that all of our clients, friends, and business associates enjoy the hospitality of our firm’s legal staff. Doane & Doane serves clients in the communities along Florida’s Gold Coast and Treasure Coast, including Palm Beach, Broward, Miami-Dade, Indian River, St. Lucie, and Martin counties. For a free consultation and to get to know our firm, please give us a call at 561-656-0200.