As the name implies, once an irrevocable trust is created, the trustmaker can’t revoke the trust or remove the property or asset from the trust. However, just because an irrevocable trust has been created doesn’t mean that the terms and conditions of the trust can’t be changed. Before we proceed down this path, though, you need to realize that not every situation is suited for changing an irrevocable trust — and, in fact, depending on the circumstances, you may not even be able to change your irrevocable trust.
However, let’s say you could change your irrevocable trust. What would be the circumstances to do this, and how could you do it?
One way you are entitled to change an irrevocable trust is if the trust is poorly worded or if the trust no longer complies with the current laws. Another way is if the trust itself limits your ability to make wise wealth management decisions on behalf of clients who may benefit from the trust. Tax-related issues can also lead to a change in your irrevocable trust, as can a bevy of basic information issues — such as who the beneficiaries are, who holds the power of appointment, who the trustee is and which jurisdiction the trust is under.
So how can you make changes to your trust? If you go before a judge, he or she could alter your irrevocable trust in a few ways: through reformation, conversion or modification. You could also invoke a trust protector, a third party to manage the trust is your trust has such provisions in it. Last but not least you could “decant” the trust, which means you transfer funds from the trust to a new trust with updated terms and provisions.
Source: Wealthmanagement.com, “Five Ways To Modify An Irrevocable Trust,” April 1, 2016
