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11.25.20

Changing the terms of an irrevocable trust

BY Benjamin Byun

As family circumstances, laws, or a client's wishes change, clients often wonder if the terms of a trust can be updated or changed. Generally, a revocable trust can be amended easily by the trust's creator if he or she is still living. It can be more complicated to change an irrevocable trust or a revocable trust after the settlor's death. Luckily, there are some tools that can help.

Prior to the enactment of the Massachusetts Uniform Trust Code ("MUTC") in 2012, the process of making changes to an irrevocable trust was often long, expensive, and burdensome. Clients were often left with no choice but to resort to court proceedings even for minor changes. The MUTC created an alternative method known as a non-judicial settlement agreement ("NJSA") that was designed to streamline the process.

An NJSA is an agreement entered into by the "interested parties" of a trust and may address a wide range of trust matters as long as any change made by the agreement does not violate a "material purpose" of the trust. Changes that may be made by NJSA include correcting a drafting error, clarifying vague provisions of a trust, allowing the trustee to engage in an unanticipated transaction, terminating the trust, changing trustee succession language, or even modifying the dispositive provisions if a beneficiary develops an addiction, or mental or physical illness.

It is important to note that an NJSA requires the unanimous consent of all interested parties. This generally includes the beneficiaries. It may also include the trustees and the settlor if he or she is still living. If a beneficiary is a charity, the Massachusetts Attorney General's Office may also be an interested party. Unfortunately, some proposed changes may be contentious and it may be difficult to come to unanimous agreement. In that case, the parties may be forced to consider other options.

In many cases, non-judicial settlement agreements can be an effective and versatile tool. They provide an efficient way of modifying an irrevocable trust and should be one of the first options considered when an irrevocable trust is no longer working as intended.

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Benjamin Byun

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