A trust can be revocable or irrevocable, says nj.com’s article, “Can an irrevocable trust be revoked?”
A revocable trust is a living trust that’s created with a written agreement between the person creating the trust (also called the grantor or settlor) and the trustee. That’s the person who will manage the assets in the trust. The person who creates the trust, can also name herself as the trustee for her lifetime, and the trust agreement may say that the grantor can revoke or dissolve the trust. That’s why it’s called a revocable trust.
However, with an irrevocable trust, the grantor doesn’t reserve the right to revoke the trust. In effect, once the assets of an irrevocable trust are re-titled and placed in the trust, they belong to the trust beneficiaries, not the grantor. Nonetheless, an irrevocable trust can still be revoked in some states. The grantor may be able to terminate an irrevocable trust, by following the state laws on dissolution. The laws of each state vary in this area. For example, New Jersey has adopted the Uniform Trust Code, which stipulates that an irrevocable trust can be terminated by consent of the trustee and the beneficiaries.
In that state, an irrevocable trust may be terminated by a court, provided that the termination isn’t inconsistent with a material purpose of the trust. Likewise, the Minnesota Trust Code grants probate courts authority to modify non-charitable irrevocable trusts in specific situations. In the Gopher State, there are eight different sets of circumstances in which Minnesota’s probate courts have authority to modify or terminate a noncharitable irrevocable trust:
- With the consent of the settlor and all beneficiaries;
- With the consent of all beneficiaries;
- If unanticipated circumstances arise;
- If there’s the inability to effectively administer the trust;
- If it’s a non-economic trust, where the costs of administration aren’t justified by value of the trust property;
- The correction of mistake of fact or law;
- The achievement of settlor’s tax objectives; or
- When there’s a combination or division of trusts.
Speak with an experienced estate planning attorney, if you have questions about revocable and irrevocable trusts.
Reference: nj.com (March 25, 2019) “Can an irrevocable trust be revoked?”