Generally speaking, an Irrevocable Trust may not be changed, but several narrow exceptions allow a deceased spouse’s Irrevocable Trust to be amended. To make any changes, the surviving spouse should have the advice and services of the right Cape Cod estate planning attorney.
Irrevocable Trusts have become increasingly popular in recent years as an estate planning tool. Irrevocable Trusts often reduce the tax burden on a Donor’s estate (a Donor is the person who creates the Irrevocable Trust) while transferring the Donor’s assets to his or her loved ones.
Additionally, assets in Irrevocable Trusts are protected from creditors and legal judgments because an Irrevocable Trust will not be a party to a lawsuit. In return for these benefits, the Donor gives up his or her right to amend the terms of an Irrevocable Trust.
However, after a spouse’s death, the law in Massachusetts (specifically Massachusetts General Law Chapter 203E § 411) does allow for revisions to a deceased spouse’s Irrevocable Trust, provided that specific criteria are met and that the appropriate legal procedures are followed.
What Are Irrevocable Trusts and How Do They Work?
A Revocable Trust becomes irrevocable upon the death of the person or persons who have the right to amend the trust. If each spouse has a separate revocable trust, when one spouse dies, that spouse’s trust becomes irrevocable. In many cases, the trust is designed to split into two or more irrevocable sub-trusts. This is usually done for a specific, limited purpose, such as estate tax reduction. The Typical A-B Trust does just that. In some states, like Massachusetts, it is necessary to create A-B-C trusts to shelter a portion of the estate from the state estate tax. But after one spouse dies, it may become desirable to modify the irrevocable trust because of changes in the law, tax changes or changes in a family’s situation.
After the death of a Donor, a Successor Trustee is responsible for the administration of the Trust. In Massachusetts, a Successor Trustee may need the advice of a Cape Cod Trust attorney to ensure a smooth and straightforward administration of the Trust at every stage of the process.
Amending an Irrevocable Trust by Petitioning the Court
After a Donor’s death, if all of the beneficiaries agree, they may petition a Massachusetts court to amend an Irrevocable Trust. If their proposed revision does not conflict with the original aims of the Trust, the court will usually grant the beneficiaries’ request and allow the amendment.
A petition for court-approved modification of an Irrevocable Trust may be particularly helpful after a Donor has died and the beneficiaries need to modify the Trust because circumstances have changed.
What Is Decanting?
“Decanting” allows the Successor Trustee of an Irrevocable Trust to distribute – or to “decant” – assets from the original Irrevocable Trust into a second Trust with more favorable provisions.
The original Irrevocable Trust must contain a provision that gives the Trustee authority to decant the trust. Decanting doesn’t “amend” an Irrevocable Trust, but decanting instead creates a new Trust that in effect amends the original Irrevocable Trust.
There is no Massachusetts law that specifically authorizes decanting, but in the case of Kraft v. Morse (2013), a Massachusetts court held that when an Irrevocable Trust gives a Successor Trustee the authority to make discretionary distributions, decanting is included in that authority. Additionally, the Kraft case requires that going forward, a decanting provision must be included in the original trust document for a Trustee to decant an irrevocable trust in Massachusetts.
What Are Trust Protectors?
Some trust documents may include Trust Protector provisions. A Trust Protector may be an individual may be named within the document, or sometimes the trust may allow for naming the person to act as a trust protector in the future. The language in the Trust document spells out the precise authority that a Trust Protector has, but essentially, a Trust Protector’s role is to protect the inheritance that is passing through the trust.
Some Trusts grant a Trust Protector limited authority to amend the Trust. This authority may include the ability to amend the Trust in response to changes in tax law, to remove a Successor Trustee, or to take other actions to protect the Trust assets. If granted the authority, a Trust Protector may:
1. amend the language of the Irrevocable Trust document
2. remove a Successor Trustee or beneficiary
3. modify distributions based on the beneficiaries’ circumstances
Can a Trust Document Provide for Its Own Changes?
Trusts have developed over time, and today’s Irrevocable Trusts may include many provisions that were not usually included in older versions of these documents. These provisions may offer more flexibility in the distribution of assets and the management of the Trust. In fact, in many states, the law allows for an Irrevocable Trust to be amended by an agreement among the Donor (if available), all beneficiaries and the Trustee. For states where there is no such provision under state law, an Irrevocable Trust document may allow the trust to be amended if the Trustee and the beneficiaries all agree on the terms of the amendment. Amending by Agreement can save families thousands of dollars by avoiding the need for a court proceeding to amend the trust.
If your spouse has passed away, a Cape Cod estate planning attorney can review your deceased spouse’s Irrevocable Trust and scrutinize the document’s language to determine if it allows for amendments or changes.
If you need to amend a deceased spouse’s Irrevocable Trust, and if the change is legal, reasonable, and does not conflict with the general goals of the Irrevocable Trust, a Cape Cod Trust attorney can probably help you make any necessary changes.
Why Would You Change a Deceased Spouse’s Trust?
While an Irrevocable Trust may need to be changed, for example, in order to respond to changes in the tax laws, a Trust may also need modification for specific and personal reasons. Let’s say that a husband creates an Revocable Trust, for himself and names his wife and adult children as beneficiaries after his death, and names his wife’s brother as the Successor Trustee.
Upon the husband’s death, the Trust becomes Irrevocable. Typically the Irrevocable Trust would now become a new taxpayer. Most Irrevocable Trusts are taxed at very high rates – 37% on income over $13,451 as of 2022. If the surviving spouse wished to lower the taxes, a simple amendment can change the way the Irrevocable Trust is taxed. For example, the Irrevocable Trust could be amended so that the trust is essentially ignored for income tax purposes. This would result in the income being taxed at the same bracket as the beneficiary – and result in significant tax savings every year.
But remember, an Irrevocable Trust must include a provision for (1) amending by agreement, (2) amending through a Trust Protector, or (3) amending by decanting. Otherwise, any change of this nature requires unanimity among all of the beneficiaries. If even one beneficiary opposes an amendment to an Irrevocable Trust, a Massachusetts court will not approve or even consider the modification proposal.
Sometimes, there may be additional methods to amending a trust, so don’t rule out the option if you think it may be difficult to get one beneficiary’s approval. Instead you should consult with a Cape Cod estate planning attorney who can tell you your options.
When Should You Contact a Massachusetts Trust Attorney?
If you do not have a Trust, Will, or estate plan established, you probably should, especially if you have a family, own a business, or own property or assets. We cannot predict tomorrow, so you should consult an estate planning attorney now about protecting your estate and your loved ones.
When an Irrevocable Trust document does not precisely spell out how a Trust dispute is to be resolved, a beneficiary or Successor Trustee may need the advice and services of a Massachusetts Trust attorney to help manage and resolve the dispute.
Massachusetts Trust attorneys also offer Trustee and estate administration services aimed at helping a Successor Trustee effectively handle his or her many obligations.
If you need to make changes to a deceased spouse’s Irrevocable Trust, a Massachusetts Trust lawyer will work with you and will provide the insights and legal services you may need. To learn more – or to begin the process of amending an Irrevocable Trust – you should contact a Trust attorney now.