Can an irrevocable trust be changed? Find out in this comprehensive guide from an experienced estate planning attorney.
Can an Irrevocable Trust Be Changed?
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A trust is a fiduciary arrangement where one party or a trustor allows another party or a trustee to hold assets or property for the beneficiary’s benefit. The trustor or the grantor is the party who creates the trust, while the trustee has the authority to manage the trust’s assets and the property held in trust.
The trust’s purpose is to provide asset protection, avoid probate, save time and court fees, and potentially reduce estate tax. When using a trust, trust beneficiaries can gain access to trust assets more quickly.
Trusts can be revocable and irrevocable. Revocable trusts can be revoked or amended by the trustor. On the other hand, with irrevocable trusts, the usual belief is that they cannot be amended or revoked after being created. However, that is not entirely true – there is a way to amend even irrevocable trusts.
Can an Irrevocable Trust Be Amended?
It is essential to understand the difference between revocable and irrevocable trusts. For example, if you put assets in a trust, but you remain in control by being both the trustee and the grantor, you have created a revocable trust.
Revocable trusts are subject to any lawsuits and estate tax because the grantor can revoke and amend the terms of the trust at any time. Property held in a revocable trust is considered your personal assets, and it may count against you if you file for Medicaid. However, when you create an irrevocable trust, income earned by the trust is not taxable, and creditors can’t access trust funds.
When the grantor creates an irrevocable trust, he or she can’t act as a trustee, and they relinquish the authority to manage trust funds. But, they can appoint a trustee who will be able to manage the trust property. The grantor, however, loses the ability to manage the trust assets.
An irrevocable trust has become a lot more flexible in the state of Georgia since 2018 when a set of laws amended the GA Trust Code in a way that would be beneficial to anyone with an irrevocable trust in this state.
If you would like to amend it, you could benefit from a consultation with an experienced estate planning attorney like Paul Black of The Law Office of Paul Black. He is the estate planning attorney who can help you navigate the various irrevocable trust amendment mechanisms.
Is an Irrevocable Trust the Right Move for You?
If you are trying to prevent misuse of your assets and property, qualify for certain benefits, reduce the tax burden of your beneficiary or beneficiaries and protect your assets or real estate from creditors and lawsuits, then the irrevocable trust is the right move for you.
The downsides are that an irrevocable trust can not be changed easily, so it’s vital to be certain you know what you are doing. It’s best to place assets in this type of trust if you want to ensure your beneficiary will have them under the terms of the trust.
Is It Possible to Modify an Irrevocable Living Trust?
In addition to the ways described above, there is also an alternative to amending a trust called “trust decanting.” Trust decanting is a method of modifying a trust agreement. If the trust authorizes the trustee to distribute assets of the trust at their discretion, then the trustee can remove assets from one trust to another with more favorable terms.
However, in the case of trust decanting, certain rules have to be followed, including that the new changes have to be in the best interests of all the beneficiaries. In addition that the existing trust holding the assets has to be created as an irrevocable trust, the trustee may not be among the trust’s beneficiaries. Also, the trustee must have the power to make discretionary distributions of trust assets for the benefit of other beneficiaries.