Is an irrevocable trust really irrevocable?
Trusts in New York City are categorized into two different kinds, revocable and irrevocable. Each type of trust has different advantages. For example, revocable can be somewhat easily changed. However, the ease of changing a revocable trust means that it can have a negative impact when it comes to how that trust would be viewed for tax purposes or estate planning purposes. Because of this, irrevocable trusts tend to be quite common when it comes to future planning.
In the case of some trusts, however, there may be reasons that the parties hope to terminate the trust, perhaps to address changing circumstances or something similar. Is it possible for the grantor, trustee and/or beneficiaries to terminate a trust altogether? The simple answer is that it is possible, although it is a process that is needed to be handled by an experienced New York City estate attorney.
Until relatively recently, it would be impossible to change an irrevocable trust, including terminating it, unless there was one of two things in place. One would be that there had to be an error in the creation of the trust. The other would be that the trust had it somehow written into the document that the trustee was allowed to make such changes. Because these were the only two ways to modify or overturn a trust, it was mostly an impossible thing to do.
In 1992, that changed when New York introduced EPTL 7-1.9. That law did allow for a trust to be modified or terminated in some circumstances, although there were very specific rules that needed to be followed.
In order to modify a trust in any way under EPTL 7-1.9, there are two major requirements that must be met. One is that the grantor, or the person who created the trust, must still be alive and be the one who makes the request to terminate or change the New York trust. The other is that all of the beneficiaries must consent to the change, which also meant that all of the beneficiaries must be competent to consent to the change. This part means that those who are legally unable to enter into contracts, such as minors or those who are incapacitated, would not be legally able to agree to the change, making it impossible. Nevertheless, it is possible to completely terminate a trust in cases where the grantor makes the request while alive and all of the beneficiaries are competent adults and agree to the termination or modification. Needless to say, the wishes of the parties involved should be sufficiently documented.
New York City estate planning, including creating, modifying and terminating trusts, require an attorney who will be able to explain to all of the parties what the long term consequences will be when it comes to things like Medicaid and estate tax planning. Finding a New York City estate attorney who understands the intricacies of the law in New York is essential to make sure that estate plans are stable and only need minimal later court intervention.
In any case, where you are looking to modify or terminate a trust, call the Law Offices of Albert Goodwin at (212) 233-1233, and we will be happy to talk to you.