An irrevocable trust is what it sounds like: irrevocable. One way this type of trust is commonly used is for a parent to set up a trust for their children. The trust has creditor protection and tax benefits. But, when things change through the years, the trust does not. The terms of the trust, the assets in the trust, the beneficiaries, and the trustee do not change.
Although its terms cannot be changed, over the last 25-plus years, statutes have been enacted that have ways around the term “irrevocable” and there are now some ways that an irrevocable trust can be changed.
At Springer & Lyle, if there are reasons to change your irrevocable trust, we help you with this process and do everything that can be done to minimize any tax consequences that may come with making the changes.
Ways to Change an Irrevocable Trust with Designations in the Trust Itself
When an irrevocable trust, by its own terms designates someone who can make changes, that can be done in limited ways. They are:
Designation of an independent person who can make changes. The trust document itself can designate a trust protector who can make some changes to the trust.
Give a beneficiary a power of attorney. The trust document can give a power of attorney to a beneficiary and allow that beneficiary to distribute assets to a particular group of beneficiaries and these may be different from the terms specified in the trust.
Ways to Change an Irrevocable Trust When the Trust Document Does Not Provide a Way to Make Changes
Changes by way of agreement. If all the beneficiaries and trustee agree, changes can be made to the trust. These generally are limited to administrative and investment changes. Agreements cannot make changes to the beneficiaries. The Settlement Agreement must be signed by all involved and filed with the court.
Changes by way of a court order. The trustee must petition the court and ask for changes. There is a list in the Texas statute of reasons why the court may allow these changes to be made.
Decanting. This involves moving the assets in the trust to another trust for the benefit of one or more of the current beneficiaries.
Changing an irrevocable trust is not an easy process. It takes the expertise of a trust lawyer. To schedule a consultation, contact Daniel Abasolo or call him at 940.387.0404.