Trusts are powerful estate planning tools used to protect assets, minimize taxes, and ensure financial security for beneficiaries. Irrevocable trusts are designed to be permanent, but what happens when circumstances change? If you’re wondering whether an irrevocable trust can be altered and the conditions that must be met for the document to be changed, continue reading and speak with a knowledgeable lawyer today.
What is an Irrevocable Trust?
Trusts are fiduciary arrangements that essentially own assets transferred to them. It is a legal entity that holds assets like money, property, and investments, and creates a relationship where the grantor (the individual who creates the trust) transfers assets to a trustee to manage on behalf of beneficiaries.
An irrevocable trust is a legal arrangement where the assets are permanently transferred to the trust and are no longer considered the grantor’s property. This is different from a revocable trust, which can be changed at any time by the grantor. While irrevocable trusts have limited flexibility, they offer other benefits like protection from creditors, reduced taxes, and more.
Can an Irrevocable Trust Be Changed?
An irrevocable trust generally cannot be altered or revoked by the person who created it. However, under certain circumstances, an irrevocable trust can be changed.
New Jersey state law allows modification or termination of an irrevocable trust, given that one or more of the following conditions apply.
- The trustee and all beneficiaries have given consent, and the modification or termination is consistent with the material purpose of the trust
- A court order permits an alteration
- The assets are being transferred to another trust
In order for an irrevocable trust to be altered, it is crucial that the modifications do not violate the original intent of the trust. Courts must carefully review petitions to ensure that beneficiaries are not harmed by any changes.
What is Trust Decanting?
Trust decanting is the process of transferring assets into a new trust with updated or more favorable terms. Think of it as pouring assets from one trust to another, the way you would pour wine from a bottle into a decanter.
Decanting is a valid reason for a modification of an irrevocable trust in New Jersey, though state laws only allow limited forms, and the trustee must abide by strict rules. Again, the new trust cannot violate the core purposes of the original trust.
Although an irrevocable trust can be modified, it is important to keep in mind that any changes must reflect the purpose and values of the original intent. If you have questions or concerns about trusts and estate law, do not hesitate to contact an experienced attorney at Laddey Clark & Ryan, LLP today.
