What Are Reasons That A Trust May No Longer Achieve Its Goals?
A trust can break when it essentially no longer serves the purpose for which it was created. This can happen at different times during the lifetime of a trust, from its inception to the final distribution of all assets and the filing of a tax return. A break can occur in a trust created under someone’s will when there is a change in family circumstances. A family circumstance change can include the death, marriage, or divorce of a beneficiary. Other examples include beneficiaries having additional children, developing substance abuse issues, becoming a spendthrift, having creditor problems, or becoming disabled. If a public benefit, such as Social Security disability or Medicaid, is needed, an existing trust may not serve that beneficiary’s needs properly.
The next type of break that we typically see is that the trust has fulfilled its initial purpose and the goal has been achieved. This would happen most commonly in the instance of a trust created for a minor child where the property is to be released at a certain age. Another issue where the trust is broken is if a change of law has created an unfavorable situation in a trust.
If you have created your own living trust and you are alive and mentally competent, then you can always revoke, amend, or restate your trust, as long as your trust document gives you the authority to revoke it. Under Florida law, if there is nothing about revocability or irrevocability, then the trust defaults to revocable. Your second option could be to restate the entire trust. If you want to write your restatement of trust, it may not necessarily be as expensive as you would think.
The last way to handle a broken trust is to revoke it entirely and that can be done if you have the power to revoke. Under Florida law, there is also a precedent that allows all the parties of an irrevocable trust to break it, if there is complete agreement to revert all the money back to the original creator of the trust. If we have a grantor of an irrevocable trust alive, then that is another situation where a broken trust can be repaired.
If there is an irrevocable trust, depending on the reason for modifying the trust, there can be ways to change it. Under Florida law, at creation, you can include a power of appointment, which allows you to change beneficiaries. You can also include a provision called a trust advisor or trust protector that will allow a third party to name a trust advisor to modify to the extent that you wish. There are also provisions under Florida law called decanting, which mean moving assets from one trust to a substantially similar trust, as long as certain requirements are met.
If your initial documents do not contain any of these provisions, then you may need to look at whether the trustee and all beneficiaries can agree to modify or terminate the trust. Florida law also permits an interested party to petition the court and ask a judge to modify a trust that would otherwise be irrevocable. A trust modification is not an amendment to the trust, it is a modification, which has a different legal effect.
If the creator of the trust is deceased and there was a trust created by someone else as a sub-trust under an estate planning document, then that trust would be irrevocable. If the beneficiary or the trustee experiences any of the events that cause the trust to no longer fulfill the needs of the beneficiary, then there could be options to potentially modify it by agreement or request court assistance to order the modification of the trust.
Even when the grantor is deceased and the trust terms are irrevocable, there are ways to potentially modify the trust. It all depends on the terms of the trust, the facts and circumstances surrounding the desired change, the initial intent of the grantor, current law, and the current beneficiary situation. The best way to get started is to see a Florida estate, trust, or Elder Law attorney to assist you in your ability to modify a trust to fit a broken situation.
For more information on Dealing With A Broken Trust In Florida, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.
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