Even the most cautious and informed people sometimes end up making estate planning mistakes that result in unintended consequences for loved ones. A trust might have become outdated due to the introduction of new laws. Or, unforeseen life events might have left a person’s estate planning goals impossible. As a result, it is vital to understand that it is possible to remedy these problems. This article reviews some of the ways in which estate planning mistakes can be remedied.
Irrevocable Trusts Can Sometimes Be Revised
One of the hallmarks of irrevocable trusts is that they cannot be revoked. In some situations, however, these trusts can be modified. For example, the trust might allow the trustee or beneficiary to make modifications to the trust’s terms in certain situations.
Petition to Modify the Terms of a Trust
In cases where the terms of a trust have changed substantially, administration costs have become excessive, or the trust’s purpose can no longer be achieved, it is often possible to petition the court to modify the trust’s terms. These modifications often rely on establishing that the trust’s purpose cannot be achieved without these changes.
Name a Trust Protector
By making some decisions while creating a trust, it is possible to avoid complications down the road. For example, a trust creator can appoint a third party “trust protector” who determines whether the terms of a trust should be changed. To utilize a trust protector in this way, however, the trust must be written with this option.
Power of Appointment
Besides appointing a trust protector, it is also possible to write a “power of appointment” into a trust. This power makes it easier to modify the terms of the trust for the advantage of either current or future beneficiaries.
Decanting
In situations where a trust can not be modified, it is possible to decant the trust. This process involves transferring the assets from an existing trust into a new trust with different terms. Under New York law, trustees and beneficiaries of an irrevocable trust are permitted to modify the trust without the need for court intervention. To decant a trust in New York, four prerequisites must be met: the trustee must have absolute discretionary distribution authority to distribute the trust’s assets, the transfer of the assets cannot reduce any fixed income interest of any income beneficiary to the trust, the transfer of the assets must be to the advantage of one or more proper beneficiaries under the trust, and the new trust cannot contain terms that violate public policy.
Sometimes, The Trust Is Best Ended
In some situations where the terms of a trust cannot be modified, the best idea is to end the trust. The assets from the trust are then distributed to beneficiaries and the trust is dissolved. Terminating a trust, however, requires obtaining approval from all beneficiaries and trustees.
Contact a Seasoned Estate Planning Lawyer
While it is often possible to do so, it is not always easy. If you need assistance correcting an estate planning error, do not hesitate to speak with a knowledgeable attorney. Contact Ettinger Estate Planning today to schedule a free case evaluation.