Irrevocable trusts are just that – irrevocable. Therefore, when asking the question “can an irrevocable trust be amended?” the answer is usually “no” you normally cannot revoke or amend them. However, the old adage “nothing in life is ever permanent” applies, provided you know a little about trusts in general, and irrevocable trusts specifically.
Luckily, we at Doane & Doane know a little about trusts and other estate planning vehicles, and we are ready to help you with any kind of advanced estate planning you may need. In fact, we are truly delighted to help anyone interested in knowing more about, or possibly wanting to create, an irrevocable trust because we believe that they are amazing estate planning tools for many people.
Also, with Doane & Doane, you are not only getting top-notch representation, but you can benefit from our experience handling estate plans and irrevocable trusts for countless clients. Let us give you the sound advice you need when handling one of the most important facets of your life – your financial future. We invite you to call us today at 561-656-0200 and set up a free consultation regarding irrevocable trusts or any estate planning issues that are on your mind.
In this article, we will take stock of what an irrevocable trust is, and why it can be such a smart way to manage your assets and plan for the future. Then, we will dive into the subject of showing how we can give you a qualified “yes” to the question “can an irrevocable trust be amended?”
An Irrevocable Trust: Allowing Someone Else to Manage Your Assets
Trusts come in two general forms – revocable and irrevocable. Understanding the difference between the two can be helpful.
If you have assets that you put in a trust, but you keep control over that trust (i.e., you are both the grantor who creates the trust and the trustee with the authority to manage the trust assets), then you have created a revocable trust. That is because you, as grantor, still own the property in the trust, and are taxed on any trust income.
Why are you taxed in that situation? Because you have the ability to eliminate, or revoke, the trust at any time.
Conversely, if you create an irrevocable trust, then any income earned by the trust is not taxable to you as the grantor. In addition, any of your creditors cannot access those trust funds.
Why is that? That is because when you create an irrevocable trust, you are not able to act as the trustee of that trust. You relinquish authority to manage those funds. Indeed, in creating an irrevocable trust, you as the grantor have the ability to appoint a trustee who will manage the property in the trust. That is, however, the only power you have over that trust moving forward.
In other words, with an irrevocable trust, you lose your ability to manage the assets in the trust. Yet, as compensation for that, you no longer have to worry about being taxed on any trust income, and the property is safe from creditors who are looking to collect any liabilities from you or your estate.
Notably, there are various types of irrevocable trusts. A bypass trust will hold the assets for the benefit of a surviving spouse when you pass away. A charitable trust, which is a somewhat popular type of trust for wealthier clients, will transfer the grantor’s property to charity at the time of their death. Finally, there is a special needs trust, which provides for disabled family members if they might lose government benefits due to an inheritance at the time of your passing.
The 5 Ways You Can Amend an Irrevocable Trust
First, it may be possible to effectively terminate the trust by removing all of its assets. This is less of an amendment to the trust and more like a way to modify it by emptying it out. By disposing of all of the property in the trust, you do not technically end the trust, but you have a trust that exists with no assets.
For example, if you have a trust that owns a life insurance policy, and thus it is an irrevocable life insurance trust, then you can simply not pay your premiums. By failing to pay premiums, the policy will lapse and the life insurance trust will be empty.
Second, you may be able to exercise the “power of appointment.” If the trustee or beneficiaries are given a lifetime power to make changes to the trust, then an irrevocable trust can be amended through an exercise of that “power of appointment” as per the terms outlined in the trust.
Third, use a “trust protector.” Some newer estate plans allow for an independent third party to be appointed by the trustee, trust beneficiaries, or the court. That person is a “trust protector.” That person can review a proposed modification to the trust and say “yes” or “no.”
Fourth, ask the court to modify the trust. A court can, when given reasons for good cause, amend the terms of an irrevocable trust when a trustee and/or a beneficiary petitions the court for a modification.
Fifth, and finally, exercise allowable trustee or beneficiary modifications. If your irrevocable trust is drafted with an eye towards the need for changes down the road, then it should have instructions on how a trustee, or beneficiary, may change the trust. Such modification provisions are common with charitable trusts, to allow modifications when federal tax law changes.
So, Can an Irrevocable Trust Be Amended? It’s Possible. Get the Help of an Experienced Attorney Like the Attorneys at Doane & Doane
If you are asking “Can an irrevocable trust be amended?” then you might benefit from a call to the attorneys at Doane & Doane. We can review your case, help you understand the parameters of Florida law regarding trusts, and help you make the right choice.
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. Contact a Doane & Doane professional today by calling 561-656-0200.