An irrevocable trust generally cannot be changed or dissolved by the creator, or grantor, of the trust. A person usually sets up the trust to protect assets, which elude estate taxes or lawsuits, by handing over control of the estate to the trust and named trustee. However, situations may arise in which an irrevocable trust can be amended, modified and even revoked, according to state laws. Seek advice from an estate planning attorney on laws regarding revoking a trust.
Control of the Trust
The two main types of trusts are irrevocable trusts and revocable trusts. If you choose to establish an irrevocable trust, you transfer estate assets, which may include property, possessions and money, to the trust. You appoint a trustee to control the trust, according to your agreement. You have no control over the trust, and all assets remain there until your death. A revocable trust can be changed or revoked at any time by the grantor, who has control over the trust.
People often select irrevocable trusts for tax benefits. The assets in the trust are not subject to estate taxes because that property belongs to the trust. Creditors cannot seek possession of the assets if lawsuits arise. The trust is basically a separate entity, and the assets do not belong to you. While assets in a revocable trust can be taxed and subject to lawsuits, people often choose revocable trusts, because they have control and can change or dissolve the trust at any time.
Consent on Changes
Even an irrevocable trust can undergo changes. Changes and modifications can occur when the grantor or beneficiaries in the trust reach an agreement on amending the trust. The grantor and the beneficiaries must sign a written request for the changes. State laws vary, and sometimes changes to an irrevocable trust can only be made when the trustee also agrees. Changes can include revoking the trust. In some cases, beneficiaries may petition the court to amend or terminate a trust upon the grantor’s death, depending on state laws. Courts may approve the changes or revoke the trust if all beneficiaries agree and circumstances the grantor had not anticipated interfere with the purpose of the trust agreement.
Reasons beneficiaries may try to revoke an irrevocable trust include financial situations in which funds in the trust were smaller than anticipated. They may agree to seek to amend or revoke the trust because of unanticipated beneficiaries, which require immediate benefits from the trust. The grantor may seek to revoke an irrevocable trust if, for example, unexpected life changes make the purpose of the trust inappropriate or the grantor was given bad financial advice while setting up the trust agreement. The grantor would also have to obtain the consent of beneficiaries in the trust and petition the court.
- Jupiterimages/Comstock/Getty Images
- How to Withhold Medical Expenses From a Paycheck
- What Is an Amortization Expense?
- How to Carry Over a Donation Deduction
- What to Look for When Buying a Flat-Screen TV
- Liabilities of a Sole Proprietorship
- Tax Implications of Early 401(k)
- How to Renovate a Studio Apartment
- How Much Money Do Parents Spend Yearly on Kids and Teens?
- How to Make Cheap Outside Christmas Decorations
- How to Show Proof of Funds to Buy a House With Cash