What Is a Revocable and Irrevocable Trust?
Typically, you cannot amend an irrevocable trust . But, as they say, there is an exception to every rule. So, this article is going to take a little time to discuss the meaning of an irrevocable trust, and then discuss exceptions that might make a trust a little less “irrevocable.”
In the main, trusts can be very difficult documents to understand. That is why you most likely need an experienced estate planning attorney to assist you with the creation and administration of one. You should look no farther than Doane & Doane. We are the top estate planning attorneys in Palm Beach, FL. We understand trusts inside and out, and we can give you sound, useful advice on the many options available to effectively plan for how your assets will be handled during your life, and how they pass to loved ones.
We welcome you to call us today to learn how important taking the first step to estate planning can be. You can reach the professionals at Doane & Doane by calling 561-656-0200. Now, on to the question of “Can you amend an irrevocable trust?”
What Is a Revocable and Irrevocable Trust?
Trusts come in two general forms – revocable and irrevocable. Understanding the
difference between revocable and irrevocable trust
A living trust can be either revocable or irrevocable. When the person creating the trust (the grantor) creates a revocable trust – which we have discussed in previous blogs – the grantor normally acts as the trustee and manages the assets that he or she places into the trust. The grantor still owns the property placed into a revocable trust, and is taxed on trust income because the grantor has the right to take the assets back or eliminate the revocable trust at any time.
By contrast, the grantor of an irrevocable trust cannot act as the trustee of the trust. Rather, the grantor funds the trust and then steps aside, appointing someone else to manage the assets in the trust.
Accordingly, any income earned in the trust is not taxable back to the grantor. Also, the property held by an irrevocable trust is not vulnerable to the grantors’ creditors. That is all because the property in the irrevocable trust is no longer the grantor’s property.
There are several kinds of irrevocable trusts, including
1. A “bypass trust,” which upon the grantor’s death holds the grantor’s property for the benefit of a surviving spouse;
2. A “special needs trust,” that provides for disabled beneficiaries who might lose government benefits if they received an inheritance outright; and
3. A “charitable trust,” which ultimately transfers the grantor’s assets to charity.
Can You Amend an Irrevocable Trust? The 5 Exceptions
#1 – Modification by the Court
A court is permitted to amend the terms of irrevocable trust when a trustee and/or a beneficiary petitions the court for a modification. Normally, if something over time has changed that makes an irrevocable trust unreasonably expensive, or if the purpose of the trust has become obsolete, then a court may allow modification or termination of the irrevocable trust.
#2 – Trustee or Beneficiary Modifications
The drafting of an irrevocable trust may have already anticipated the need for amendments. Therefore, the terms may provide instructions on how a trustee, or beneficiary, may change the trust. Indeed, charitable trusts typically contain language that allows for changes in the federal tax laws.
#3 – The “Power of Appointment”
In some cases, the trustee or beneficiary is given a so-called “power of appointment.” It can be a lifetime power that allows for changes to the trust terms for the benefit of current or future beneficiaries.
#4 – The Trust Protector
Some newer estate plans use a “trust protector” who has the ability to review proposed modifications and make a determination to “yea or nay” an amendment. A trust protector is an independent third party appointed by the trustee, trust beneficiaries, or the court.
#5 – Simple Termination of the Trust
Rather than change the terms of an irrevocable trust, another way to “modify” one is to simply dispose of the property held by the trust, effectively terminating the trust. By taking all of the property out of the trust, the trust may still exist but without any assets. It is like an empty shell.
As an example of technically terminating a trust by disposing of the assets, look at an irrevocable life insurance trust. That type of trust owns a life insurance policy. By not paying the required policy premiums, the policy will lapse, thereby leaving the irrevocable trust empty.
If you are the trustee or a beneficiary of an irrevocable trust that is governed under Florida law, and you are curious about the question – “Can you amend an irrevocable trust?” call the expert attorneys at Doane & Doane.
Our top-notch lawyers can review your case and help you make the best option. In addition, if you have an interest in creating an irrevocable or revocable trust, Doane & Doane attorneys can take care of the details. Contact a Doane & Doane professional today by calling 561-656-0200.
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 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.
Disclaimer: The information on this website and blog is for general informational purposes only and is not professional advice. We make no guarantees of accuracy or completeness. We disclaim all liability for errors, omissions, or reliance on this content. Always consult a qualified professional for specific guidance.
RECENT POSTS
