In our last article, we discussed the basic differences between revocable and irrevocable trusts. We noted that when you use an irrevocable trust for asset protection, you give up some measure of control. However, there are still ways to modify these types of trusts should your planning goals become frustrated down the line.

So, while many people think that you can’t modify an irrevocable trust, we’re here to tell you that this is a false assertion. While the name lends itself to that very belief, the truth is that changes in the law, family, trustees, and finances sometimes frustrate the trustmaker’s original intent. Or, sometimes, you may identify an error in the trust document itself. When this happens, it’s wise to consider trust modification, even if that trust is irrevocable.

Here are three examples of when an irrevocable trust can, and should, be modified or terminated:

Changing tax law

Let’s say you created an irrevocable trust 25 years ago, and the trust held a life insurance policy excluding proceeds from your estate for federal estate tax purposes.  Today, that same federal estate tax exemption for estates is quite higher than it was in the early 1980s. With that more favorable exemption, your trust may now be unnecessary.

Changing Family Circumstances

In this example, you’ve created an irrevocable trust for your grandchild. Now an adult, that same grandchild suffers from a disability and would benefit from government assistance. The existence of this trust would prevent your grandchild from receiving assistance, while its modification may actually enable your grandchild to get the assistance she needs from the government.

Error Discovery

Finally, let’s say that you created an irrevocable trust to provide for multiple children and grandchildren. However, after you created the trust, your son discovered that his son had been inadvertently and mistakenly omitted from the document. In this case, there’s a quite simple remedy, and that’s a modification of your irrevocable trust to include the stray grandson.

At Howes Law, we have extensive estate planning experience, and we offer thorough analysis of trusts as one of our core services. If you’re unsure if your irrevocable trust still accomplishes your goals, or if you are the beneficiary of an irrevocable trust that is not working well, we would be happy to take a look. Perhaps a modification or the termination of the trust is a better option for your changing circumstances.

To make that determination, we need to review the irrevocable trust document with you. To get that peace of mind, please do not hesitate to contact us.