Trusts are commonly used within an estate plan because a trust can help to further so many estate planning goals. Given how popular trusts are, there is a very good chance that you will establish a trust, be named as the beneficiary of a trust, or oversee the administration of a trust at some point. If that trust is an irrevocable trust, can it be modified or terminated? The Coral Gables trust attorneys at Stivers Law discuss modifying or terminating an irrevocable trust in Florida.
All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason once active.
Modifying or Terminating an Irrevocable Trust in Florida
There is a myriad of reasons why you might want to terminate an irrevocable trust. Whether or not you are able to do so will depend on your relationship to the trust and what your reason is for wishing to terminate the trust. If you are the Settlor of the trust, the general rule is that you cannot modify or terminate the trust once it becomes active.
Sometimes, however, a Trustee and/or beneficiary of a trust wants to modify or terminate an irrevocable trust. In that case, the terms of the trust itself may speak to the subject by providing authority to a Trustee or beneficiaries to modify or terminate the trust. State law also governs the termination of an irrevocable trust. In Florida, Section 736.0412 of the Florida Statutes governs the termination of an irrevocable trust under the following conditions:
(1) After the settlor’s death, a trust may be modified at any time as provided in s. 736.04113(2) upon the unanimous agreement of the trustee and all qualified beneficiaries.
(2) Modification of a trust as authorized in this section is not prohibited by a spendthrift clause or by a provision in the trust instrument that prohibits amendment or revocation of the trust.
(3) An agreement to modify a trust under this section is binding on a beneficiary whose interest is represented by another person under part III of this code.
(4) This section shall not apply to:
(a) Any trust created prior to January 1, 2001.
(b) Any trust created after December 31, 2000, if, under the terms of the trust, all beneficial interests in the trust must vest or terminate within the period prescribed by the rule against perpetuities in s. 689.225(2), notwithstanding s. 689.225(2)(f), unless the terms of the trust expressly authorize nonjudicial modification.
(c) Any trust for which a charitable deduction is allowed or allowable under the Internal Revenue Code until the termination of all charitable interests in the trust.
(5) For purposes of subsection (4), a revocable trust shall be treated as created when the right of revocation terminates.
(6) The provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, terminate, or revoke trusts.
Contact Coral Gables Trust Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about modifying or terminating an irrevocable trust in Florida, contact the experienced Coral Gables estate planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
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