An irrevocable trust is a special type of trust that cannot be terminated by the settlor once it is created. This is in contrast to a revocable trust, which can be changed, modified, altered, or canceled by the settlor.
Overall, trusts are a specific type of financial and legal instrument that allows a person to pass property to another in a controlled, manageable way. The person creating the trust is called the “settlor.” The settlor transfers property to another person called the “trustee”.
The trustee is then responsible for keeping and maintaining the property until it is finally transferred to the end recipient, called the “beneficiary.” There are many different types of trusts, each with different characteristics and purposes.
In general, all trusts are irrevocable (i.e., cannot be terminated), unless the trust agreement specifies otherwise. If a person wants a trust to be revocable, then the state law generally requires them to put the steps/requirements specifically in the trust document.
However, in some states, revocable trusts are the default type of trust. In states where the revocable trust is the default trust, an irrevocable trust can also be created by specific language in the trust agreement.
Thus, a general rule to follow is: whether the settlor desires a trust to be revocable or irrevocable, they should state this specifically in the trust document or agreement. This will help create a record of the settlor’s intent with regard to the revocability of the trust.
States may have specific laws and statutes dealing with the revocability of irrevocable trusts. In general, however, a trust cannot be revoked by the trust settlor without the consent of all the beneficiaries, or the people who are supposed to benefit from the trust. .
The exception to this is when the person establishing the trust is the sole beneficiary. In this type of situation, the person establishing the trust can revoke the trust without informing the trustee, or person managing the trust.
A trust can also be revoked under certain circumstances that the person establishing the trust can prove. For instance, a trust might be revoked if, that at the time of the trusts’ creation, the settlor was not mentally sound, or entered the trust as a result of mistake, fraud, duress, or undue influence.
The same principles that apply to revocation of a trust generally apply to modification. That is, if the settlor wants to be able to change or modify the trust in the future, then they should make this clear in the trust document when it is first created.
In general, any modification must protect the interests of the parties benefitting from the trust. In addition, many states have specific laws and statutes expressly dealing with modifications. Primarily, modifications may not go against the original intent of the person establishing the trust.
Courts are given some discretion in interpreting modification. However, they are also bound to not stray from the original intent of the person establishing the trust, unless doing so would be impossible or illegal.
As with any type of trust arrangement, different legal conflicts and issues can arise in connection with the trust. Some of these may include:
- Lack of Agreement Between Beneficiaries: As mentioned, an irrevocable trust can sometimes be revoked, so long as all the beneficiaries agree to it. This can be difficult to achieve in many cases, since any beneficiary will stand to gain something from the trust.
- If the trust is then revoked or canceled, then they may lose their rights to the property or monetary assets entirely. Thus, they might not agree to the revocation. Again, however, this depends on each individual case.
- Disputes Over Distributions: As with any trust situation, there may be disputes with the way the property is to be distributed. For instance, there may be contests or disputes regarding which particular beneficiaries are listed in the trust document.
- This is a common occurrence in situations where there are already existing disagreements or conflicts between beneficiaries (they may be fighting over “who gets what”).
- Also, there may be disputes regarding the exact property or financial funds listed in the trust documents.
Many trusts disputes and disagreements result because the original trust document was unclear or poorly-written. Thus, it is important to ensure that your trust document is very clear and understandable if you wish to create a trust. In particular, any preference as to whether you want the will to be revocable or irrevocable should be stated very clearly and in detail.
Regardless of the type of trust, any trust instrument can involve various laws and legal issues. Seeking out a wills, trusts, and estates lawyer in your area would help to navigate the complicated nuances that are associated with trust creation. Your attorney can provide you with legal advice and guidance if there are any additional issues.