Irrevocable trusts have historically been viewed as just that: Irrevocable. However, with advances in state law and drafting techniques, there are now a few ways to amend the terms of an irrevocable trust.
One emerging tool is a Trust Protector. A Trust Protector is an individual who is added to an irrevocable trust with defined powers. Those powers may include overseeing trustees’ duties, with the power to remove and replace a trustee, changing the trust situs to a more favorable jurisdiction, and modifying the trust to reflect the grantor’s original intent for protection of the beneficiaries. Trust Protectors can be used in any trust that includes express Trust Protector language, whether or not a Trust Protector was appointed at the time the document was signed.
Another way to change an irrevocable trust is a non-judicial settlement agreement. Only select states permit the use of non-judicial settlement agreements, primarily those that have adopted the Uniform Trust Code (UTC). North Carolina allows these agreements if the trust grantor is still living. This method does not require the expense and delay of court proceedings. If all interested persons agree to the amendments, and the trust is not compromised, then a judicial ruling is not required. UTS statutes also provide trust beneficiaries (if they meet certain requirements) authority to represent the interests of future and incompetent beneficiaries.
Trust decanting is a way to move the assets of an existing irrevocable trust into a new one. The new trust may have new terms. Beneficiaries must be notified, but they do not need to approve of the transfer. Similar to the non-judicial settlement agreements, decanting is not permitted in every state. Since 2009 North Carolina has allowed decanting. Fortunately, all of the states our trust attorneys serve allow decanting: North Carolina, Tennessee, Florida and New York. North Carolina was recently ranked #15 and Tennessee ranked #4 out of all states that allow trust decanting.
For a tool with a name that seems to establish an unchangeable permanence, irrevocable trusts can provide some flexibility. If you are the trustee or beneficiary of an irrevocable trust that you feel could be improved in some way, check with a trust attorney to see if there is a remedy available.