When you decide to create a comprehensive estate plan you will likely consider including a wide variety of estate planning documents beyond a simple Last Will and Testament. A trust is among the most common additions to a well thought out estate plan. If you decide to add a trust to your estate plan you will need to decide what type of trust you wish to establish, including whether you want a revocable or an irrevocable trust. Although an irrevocable trust is generally thought of as being unable to be modified or terminated once established, can you ever modify an irrevocable trust?
Trust Basics – What Is a Trust?
At its most basic, a trust is a legal relationship, or agreement, whereby property is held by one party for the benefit of another. A trust is created by a “Settlor”, also referred to a “Maker,” “Grantor,” or “Trustor,” who transfers property to a Trustee. The Trustee holds that property for the beneficiaries named in the trust. Beneficiaries can be charitable or non-charitable as well as current and/or future.
Trust Categories – Testamentary vs. Living
All trusts are first divided into either a testamentary or a living (inter vivos) trust. A testamentary trust is one that does not activate until the death of the Settlor. A living trust, on the other hand, becomes active as soon as all the elements of creation are satisfied. Whether or not you create a testamentary or a living trust will depend on the reason for the trust and the objectives you wish to achieve with the trust.
Further Division – Revocable vs. Irrevocable
Living trusts are then divided again into revocable and irrevocable living trusts. Testamentary trusts are always revocable because they do not activate until the death of the Settlor. A revocable trust can be modified or revoked at any time, and for any reason, by the Settlor of the trust. That means that after your trust is active you can add or remove a beneficiary, amend or delete any of the trust terms, or revoke the entire trust if you choose to do so for any reason. As a general rule, an irrevocable trust should be thought of as one that cannot be modified or terminated by the Settlor once the trust is established.
The Exceptions to the Rule –When Can You Modify an Irrevocable Trust in Missouri?
Wills, trusts, and estates are largely governed by state law. Therefore, when you have a question about a trust, for example, you need to look to the laws of the state wherein the trust was created. It also means that the laws in another state could be different. Missouri Revised Statute Section 456.4A-411 governs when an irrevocable living trust can be modified or terminated, stating, in pertinent part, as follows:
(1) Except for a trust established by a court under section 475.092, 475.093, 511.030, or 42 U.S.C. Section 1396p(d)(4), a non-charitable irrevocable trust may be modified or terminated upon consent of the settlor and all beneficiaries, without court approval, even if the modification or termination is inconsistent with a material purpose of the trust. A settlor’s power to consent to a trust’s termination or modification may be exercised by an agent under a power of attorney only to the extent expressly authorized by the power of attorney or the terms of the trust; by the settlor’s conservator with the approval of the court supervising the conservatorship if an agent is not so authorized; or by the settlor’s conservator ad litem with the approval of the court if an agent is not so authorized and a conservator has not been appointed.”
- Upon termination of a trust under subsection 1 of this section, the trustee shall distribute the trust property as agreed by the beneficiaries.
- If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection 1 of this section, the modification or termination may be approved by the court if the court is satisfied that:
(1) if all of the beneficiaries had consented, the trust could have been modified or terminated under subsection 1 of this section; and
(2) the interests of a beneficiary who does not consent will be adequately protected.
In essence, this means that an irrevocable living trust may be modified if the Settlor and all beneficiaries agree, or by a court.
If you have additional questions or concerns about irrevocable trusts in Missouri, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.