Q. What are my options if I want to modify or fix an already-executed irrevocable trust or will?
by John C. Moran on May 15, 2012A.
You may be surprised to learn that not all “irrevocable” estate plans are irrevocable. Have your financial circumstances changed such that you wish to access assets that have been earmarked for the future or for others? If you are a trustee, have restrictions in a trust become untenable? Or have you discovered that there is a mistake in a will or trust in which you have an interest?
When faced with these types of scenarios, it is comforting to know that Florida law provides some flexibility to deal with unanticipated circumstances, changes in estate planning goals, or later-discovered mistakes in drafting.
Here are some situations in which trusts or wills may be modified or reformed:
Changed circumstances. Florida law permits a court to modify or terminate a trust when: (1) the purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill; (2) changed or unanticipated circumstances would defeat or impair a material purpose of the trust; or (3) a material purpose of the trust no longer exists.
This concept applies to a variety of circumstances where the proposed modification is consistent with the original purpose and intentions of the person who created the trust (the trust “settlor”). For example, this process may be used to restructure access to trust assets.
Modification in the best interests of the beneficiaries. Many irrevocable trusts created after January 1, 2001, can be modified by a Florida court to better suit the interests of the beneficiaries. In so doing, the court is empowered to exercise its discretion to modify the trust in a way that, to the extent possible, conforms to the settlor’s intent, and yet takes into account the current circumstances and best interests of the beneficiaries.
There are many different ways a trust may be modified to conform to the interests of beneficiaries. Among other things, beneficiaries and trustees may seek to impose different distribution schemes, earlier distributions, or changes in how the trust is managed or administered. For example, if it can be shown that the beneficiary needs the income for health care or business needs, the trust may be restructured to allow for earlier principal distributions.
To achieve tax objectives. Florida law allows for an interested person to petition the court to modify a will or a trust to achieve tax objectives that are not contrary to a settlor’s intent.
To correct mistakes. It has been the law of Florida for some time that a trust that contained a mistake could be reformed or “fixed” to accurately reflect the settlor’s intent. In order to do so, the mistake must be shown by clear and convincing evidence. In a significant departure from prior law, in 2011 the Florida Legislature enacted law that now permits interested persons to petition a Florida court to fix a mistake in a will to conform the document to the testator’s true intent.
Unanimous agreement after the settlor’s death. Certain trusts, depending on their language, may be modified or terminated after a settlor’s death upon the unanimous agreement of the trustee and all the beneficiaries.
When circumstances or needs change, it is important to know that otherwise “irrevocable” plans may be adjusted if certain criteria exist.
Coauthor: Jane W. Brown
This post is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this information.