Judicial Modification And Termination Of Trusts
As people’s lives change, they may find that a trust previously created for their benefit no longer accomplishes its purpose or the goals intended by the grantor/settlor (i.e., creator) of the trust. In Florida, changes to the trust code that became effective in 2007 allow modifications and terminations of trusts. In certain circumstances an irrevocable trust can be changed.
At the Citrus County law firm of VanNess & VanNess, P.A., we represent people throughout Citrus County, central Florida and on a national level who desire to modify or terminate irrevocable trusts that no longer function as intended. Whether you need a simple modification of a revocable trust or a reformation or termination of an irrevocable trust, the attorneys at VanNess & VanNess, P.A., will work to modify, reform or terminate the trust nonjudicially, if authorized by law, and if the trustee and all qualified beneficiaries of the trust agree in writing. If not authorized or permitted by law, or if a nonjudicial resolution can’t be reached, the law allows judicial modifications and terminations of irrevocable trusts in certain circumstances.
Our team of attorneys performs numerous modifications, reformations and terminations of trusts when the laws are favorable to these actions. The requirements to judicially modify a trust when it is not inconsistent with the settlor’s purpose are set forth in Florida statute §736.04113. To modify or terminate an irrevocable trust, one of the following three circumstances must apply:
- The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful or impracticable to fulfill;
- Circumstances not anticipated by the settlor exist and compliance with the trust terms would substantially impair the accomplishment of a material purpose of the trust; or
- A material purpose of the trust no longer exists.
The trustee or any qualified beneficiary can seek a judicial modification of a trust. If the statutory requirements are met the terms of the trust may be amended or changed, and the trust may be terminated in whole or in part. The trust code also allows trust modifications pursuant to Florida statute §736.04115 when modification is in the “best interest” of the beneficiaries of the trust. If a trust has decreased in value over the years or becomes too expensive to maintain annually, the court may exercise its discretion and distribute the trust property consistent with the purposes of the trust.
Likewise, courts have the discretion, upon application of any interested person, to modify irrevocable trusts as necessary to achieve the settlor’s tax objectives. As always, the guiding principle in any trust modification or termination is the settlor’s intent. Uneconomic trusts can be modified or terminated if the court determines that the value of the trust property is insufficient to justify the cost of administration and if no spendthrift provision or trust clause prohibits termination under Florida statute §736.0414.
The changes allowed regarding an uneconomic trust also include the removal of the trustee, and the appointment of a new trustee. If a trust is terminated, property must be distributed consistent with trust purposes. The trustee may enter into an agreement or make other provisions as necessary or appropriate to protect the interests of the beneficiary and trustee, and to fulfill the intent and purpose of the trust.
An irrevocable trust may be modified nonjudicially without the necessity of a trust contest or filing of a complaint with the court. Florida statute §736.0412 sets the parameters for when certain irrevocable trusts can be modified upon unanimous consent of the trustee and all qualified beneficiaries.
With more than 100 years of collective experience, our lawyers draw on their deep knowledge of the intricate trust laws, and their resources to assess your objectives and options regarding trust modification and termination. Our commitment to effectively communicate with our clients ensures the confidence and trust clients place in our attorneys throughout the process.
Some trusts are more easily modified or terminated than others. Committed to the representation of clients with an eye on new developments in the trust statutes, our team of attorneys at VanNess & VanNess, P.A., will contemplate all options available to you. They will discuss the best way to proceed to ensure that future needs are met and the trust documents conform to Florida law.
Why You May Need To Modify Or Terminate A Trust
Individuals seek to modify or terminate trusts for many reasons. Some common reasons are found below:
- To achieve the settlor’s tax objective;
- When there are unanticipated changes in circumstances;
- When the trust’s purposes have been fulfilled;
- To serve the best interest of the beneficiaries;
- To remove a trustee or trustees;
- The material purpose of the trust no longer exists;
- To minimize or eliminate trustee fees, taxes and trust expenses; and
- Due to fraud, duress, mistake or undue influence
The procedure for terminating trusts in Florida is relatively simple, but it only applies to trusts created after January 1, 2001. A trust may be terminated after the death of the maker, in whole or in part, by unanimous agreement of the trustee and all qualified beneficiaries. According to Florida statute §736.0103(16), a qualified beneficiary is either a current beneficiary, intermediate beneficiary or first-line remainder beneficiary, whether vested or contingent. Small trusts valued at less than $50,000 can be terminated according to Florida statute §736.0414(1) which states that the trustee is authorized to terminate a trust of this size.
If a trust was created as the result of fraud, duress, mistake or undue influence, the termination is controlled by Florida statute §736.0406. Other options to be considered are the modification of a trust, decanting of a trust (taking assets from old trust and pouring into a new trust) and removal of the trustees of a trust.
After modifying or terminating a trust, you may require further legal advice and trust services to protect assets and perform certain objectives. We can certainly assist with the process of rewriting (decanting) an old trust and pouring the assets into a new trust.
Serving Our Clients Wherever Their Needs May Be
Florida is a retirement destination for people throughout the United States, and many trusts originally created in other states may require action on the part of a trustee or beneficiary now located in Citrus County, central Florida or other parts of Florida. VanNess & VanNess, P.A., has the resources necessary to represent our trust clients all over Florida and determine their retirement planning needs so that trusts created elsewhere can be modified or terminated in the proper jurisdiction.
To discuss your legal needs relating to trust planning, modification and termination, and to learn how we can help, contact us today by calling 352-436-4333 or toll free at 866-697-6221. You can also complete our confidential online contact form.