Did you know that an irrevocable trust can be modified? If you didn’t, you’re not alone. The name lends itself to the belief that an irrevocable trust is on lockdown. However, the truth is that changes in the law, family, trustees, and finances sometimes frustrate the trust maker’s original intent. Or, sometimes, an error in the trust document itself is identified. When this happens, it’s wise to consider trust modification, even if that trust is irrevocable.
Here are three examples of when an irrevocable trust can, and should, be modified or terminated:
- Changing tax law. Adam created an irrevocable trust in 1980 which held a life insurance policy excluding proceeds from his estate for federal estate tax purposes. Today, the federal estate tax exemption has significantly increased making the trust unnecessary.
- Changing family circumstances. Barbara created an irrevocable trust for her grandchild, Christine. Now an adult, Christine suffers from a disability and would benefit from government assistance. Barbara’s trust would disqualify Christine from receiving that assistance.
- Discovering errors. David Sr. created an irrevocable trust to provide for his numerous children and grandchildren. However, after the trust was created, his son (David Jr.) discovered that his son (David III) had been mistakenly omitted from the document.
Are You Sure Your Irrevocable Trust is Still Working for You?
If you’re not sure an irrevocable trust is still a good fit or if you wonder whether you can receive more benefit from a trust, we’ll analyze the trust. Perhaps irrevocable trust modification or termination is a good option. Making that determination simply requires a conversation and a look at the document itself. Call today, 503-850-8345, to schedule your trust review.
Photo: Lockdown - @wewon31 - CC BY-ND 2.0