There are many misconceptions held by people with regard to trusts, and one of them is the notion that you surrender all control of assets that you convey any type of trust. The first thing to understand about trusts is that there are two different classes: revocable trusts, and irrevocable trusts.
As the name would imply, with the former variety, the grantor of the trust has the right of revocation. If you establish a revocable living trust, and you decide that you want to dissolve it entirely and take back direct possession of the assets, you can do this.
After the trust has been established, you can also change it in any way that you see fit. You can convey property into the trust after it has been created, and you can remove property from the trust.
While the trust is intact, you as the grantor would act as the trustee and the beneficiary. In the trust declaration, you name successors to assume these roles after you are gone. Should you ever want to do so, you can change your trustee designation, and you can add or subtract beneficiaries as well.
You establish terms when you execute the trust declaration with regard to how you want the assets distributed. If you ever change your mind, you have the right to amend the terms of the revocable living trust.
We should point out the fact that a revocable living trust becomes irrevocable after the death of the grantor.
Surrendering Incidents of Ownership
Things are entirely different if you establish a trust that is not revocable. There are a number of different types of irrevocable trusts, but one common theme is the intention to surrender incidents of ownership. The purpose of these trusts is to divest yourself, or the beneficiaries, of direct ownership of the assets for one reason or another.
Generally speaking, the answer to the question that serves as the title of this blog post is no, the terms of an irrevocable trust cannot be changed. However, there are some exceptions.
Power of Appointment
It is possible to give a trustee or a beneficiary the discretion to change the terms of an irrevocable trust through a power of appointment. For example, let’s say that your son and your daughter are the beneficiaries of your living trust, and they receive equal distributions through the terms of the trust agreement.
Your daughter goes through some type of traumatic event, and her financial needs are far greater than those of your son. If the trustee has been given a power of appointment, they could use the discretion to increase the distributions to your daughter.
Trust Protector
Another way that an irrevocable trust can be altered is through the decision of a formal trust protector. When an irrevocable trust is established, it could contain a provision that allows for the trustee and the trust beneficiaries to appoint an independent trust protector. The case for a modification would be presented, and the trust protector would make an impartial decision.
Vermont Trust Act
Under the Vermont Trust Act an irrevocable trust can be changed by agreement of the trustor (the person who made the trust) and the beneficiaries of the trust.
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If you are currently without an estate plan, or if you have not looked at your existing plan in a number of years, action is required. We would be glad to sit down with you, gain an understanding of your estate planning objectives and your family dynamic, and make the appropriate recommendations.
You can send us a message through our contact page to request a consultation appointment, we can be reached by phone at 802-879-7133.
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