Many different types of trusts are used increasingly to accomplish a wide variety of estate planning goals. When changes in laws or in circumstances make it necessary or desirable to modify a trust, it could be challenging to proceed while fulfilling legal requirements. Terminating a trust could pose similar difficulties.
With the recent changes in the trust law applicable in Naperville, it is wise for those contemplating changes in or dissolution of a trust to consult a dedicated trusts and estates lawyer. Naperville trust modification and termination must be handled in accordance with state and federal laws to avoid increased tax liability, ineffectuality, and other negative consequences.
The array of trusts currently in use in Naperville could seem overwhelming. Revocable living trusts are commonly created to pass assets without the need to put an estate through the probate process. Making changes to this type of trust is a relatively straightforward process since laws allow for all terms to be revoked, although it is crucial to comply with legal requirements.
Irrevocable trusts are generally much more challenging to modify. In order to accomplish their purposes, irrevocable trusts must be established with terms that do not allow for dissolution. If the terms do not also provide for certain modifications, it may be difficult if not impossible to modify some irrevocable trusts. Because trusts are unique documents governed by their own individual provisions as well as state and federal law, decisions about Naperville trust modification and termination need to be made based on the conditions set forth in a particular trust.
In many but not all situations, a court needs to approve reforms or modifications in an irrevocable trust.
If the grantor who established the trust and all possible beneficiaries agree, a Naperville trust modification and termination could be accomplished with a document explaining the modification terms consented to. This is known as modification by consent. The trust must be a non-charitable trust, and every single potential beneficiary must agree to the modification.
In situations where the grantor who created the trust is unable to consent or refuses to consent to modifications, but all beneficiaries agree to the terms, the trust could be modified or terminated by court approval. Not only must all potential beneficiaries agree, but the modification also must not obstruct a material purpose of the trust. If some beneficiaries refuse consent but the court believes their interests are adequately protected, the court may still approve a modification.
In situations where a modification is sought by a trustee to assist with administration, a trustee may be able to move or “decant” trust assets into another trust with more advantageous terms. In most cases, this option is only allowed when the rights of beneficiaries remain the same in both the old and new trusts. This option terminates a trust and establishes a new one in its place.
When a trust is established as irrevocable, it is usually because the laws require this condition in order for the trust to fulfill its intended purpose. Accordingly, the same laws that require irrevocability may also place substantial restrictions on the ability to modify a trust.
However, changes in the laws and interpretations of statutes frequently open up new possibilities with respect to Naperville trust modification and termination. Accordingly, those seeking to terminate or modify a trust are advised to seek counsel from an attorney familiar with the most recent federal and state trust laws.
