If you are considering contacting a probate lawyer to help you create an estate plan, you might not be aware a relatively new provision of the law which permits you to end an “irrevocable” trust. It’s a provision that could become very useful should the needs of you and your family change over time.
What is an irrevocable trust?
An irrevocable trust is a means of transferring assets from the grantor to a named beneficiary. It cannot be terminated or changed without the consent of both parties. The grantor, having transferred assets into the trust, effectively removes all rights of ownership to the assets and the trust. This option is distinct from a revocable trust, which allows the grantor to modify the trust. One of the main reasons to place assets in trust is that they are not counted as part of the taxable income of the estate, which is useful in the case of large property holdings.
How is the new law different?
Until the recent change in 2011, “irrevocable” meant just that. The creator’s wishes dictated the terms of the trust, although changing circumstances meant that sometimes it would have been advantageous to change the document. However, it is now possible to decant a trust which otherwise would have been irrevocable, even if the person who created the trust has been deceased for a significant amount of time. For instance, some recent changes in tax laws that have occurred over the years can make it advisable for beneficiaries to change the trust, or even end it. In the past it has been difficult to enact these changes in the absence of permission from the trust’s creator, even though the person would likely have agreed to them.
This creates a complex problem. At first glance, it may seem understandable that everyone involved in the trust must agree to changing or ceasing the trust before action can be taken. In some instances, though, it is difficult or impossible to consult with of all of the family members who stand to benefit from the proposed change. Another important consideration is the fact that when people not of legal age are beneficiaries or if they have a contingent interest triggered by the death of a parent who is a beneficiary, their consent is also necessary and may be obtained with the help of a guardian.
This could turn out to be a costly and time-consuming process, so the trust needs to be reviewed in light of the relevant facts surrounding the beneficiaries. In some cases it is cost-effective to reopen the trust, but in others time will simply make the decanting unnecessary. However, thanks to these changes, it is now possible to evaluate irrevocable trusts on a case-by-case basis to determine which course of action is correct.
For help deciding whether an irrevocable trust is right for your family, contact the offices of Queens probate lawyer Richard Cary Spivack, and take control of your family’s financial future.