A trust is a legal document which provides for the administration or distribution of your property during your life and also following your death. Trusts can be testamentary (created by a Will and only effective after death) or inter vivos (created and effective during life). Inter vivos or living trusts can be either revocable (amendable) or irrevocable.
The most popular trust is the revocable inter vivos trust which is commonly referred to as the “Living Trust.” This type of trust resembles a Will but also provides for the management of your assets during your lifetime. The irrevocable trust is also an inter vivos trust whereby an individual referred to as a “settlor” transfers property to an individual referred to as a “trustee” for the benefit of the trust’s beneficiaries. An irrevocable trust has terms which cannot be changed until certain items in the trust have been completed. Irrevocable trusts are sometimes used to own life insurance, provide for asset protection planning, or come into play after an individual with a living trust passes away. In all those circumstances, the terms of the trust cannot be changed or amended. However, as a result of a law known as the Ohio Trust Code which has been established in the State of Ohio, there are a few ways that irrevocable trusts can be amended. The most common ways for an irrevocable trust to be amended are as follows:
- Court modification: Court modification refers to the ability to change the terms of the trust by agreement of the beneficiaries and/or by court order to preserve the settlor’s intent. Usually, in order to permit this type of change, it must be due to a change of circumstances from the time the trust was created until the present time. For example, this occurs when a beneficiary, who was not under a disability at the time the trust was created, falls under some sort of disability. If the current provisions of the trust provide that assets are to be held for the benefit of this disabled individual then that disabled individual could potentially lose his or her governmental benefit, such as SSI or Medicaid. Therefore, it may be prudent to obtain a modification of the trust to change the terms to provide for special needs provisions for the disabled individual.
- Trust protector: Some irrevocable trusts have a trust protector who is an individual who has no interest in the trust who is able to modify certain powers that may be contained in the trust for the benefit of preserving the settlor’s intent.
- Decanting: Decanting is a process whereby the trustee is permitted to transfer the funds from an existing irrevocable trust and distribute them to a new irrevocable trust with more favorable terms.
Please be aware that even though a trust may be irrevocable, there may be facts and circumstances which would permit the trust to be modified. Please contact an experienced planning attorney if such a circumstance occurs and you would like more information on these potential ways to modify an irrevocable trust.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning, Trust & Probate Law
by the OSBA Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663