There are many different tools available for estate planning. The most common is a will, followed by a revocable living trust. Irrevocable trusts are another possible tool. Many people are concerned about using irrevocable trusts because they may be very difficult to change once established. Irrevocable trusts are simply a trust with terms and provisions which state that the trust cannot be changed by the grantor (the person creating the trust). A revocable trust, sometimes called a living trust, on the other hand, allows the grantor to change the terms of the trust and/or take property back at any time.

Irrevocable trusts are typically used by a grantor to minimize estate tax and to protect assets from creditors. Irrevocable trusts may also be used to provide for family members who are minors, financially irresponsible, or who have special needs. Irrevocable trusts may sometimes be used for Medicaid and VA benefits planning. Anyone other than the grantor may be named as a beneficiary of an irrevocable trust. The list of possible beneficiaries is limitless. A trustee is required to manage assets of the trust.

WHAT ARE THE TRUSTEE’S DUTIES AND HOW IS AN IRREVOCABLE TRUST ADMINISTERED?

Irrevocable trusts require the services of a trustee who will take his or her job very seriously. The trustee may be the grantor’s spouse, a family member or friend. The trustee is required to act at all times in the best interest of the trust beneficiaries. This duty of loyalty is known as a fiduciary duty, which places a very high (and legally enforceable) standard of care and expectations upon the trustee. As a result, the grantor of an irrevocable trust needs to choose someone who is honest, diligent, and trustworthy (pun intended)!

The trustee must follow the terms of the trust. The trustee needs to read and understand the trust terms, including the duties and powers set forth in the trust document.The trustee has a duty to keep the beneficiaries informed about the trust and its administration. This includes providing information about the trust and its assets informally as well as providing more formal reports, if required by the terms of the trust. An untrustworthy trustee can lead to estate litigation.

ARE IRREVOCABLE TRUSTS REALLY IRREVOCABLE?

Irrevocable trusts typically cannot be amended or revoked. Irrevocable trusts are time intensive to create and should be drafted to allow the trustee flexibility to address unforeseen changes in circumstances. The Missouri Uniform Trust Code provides a few different ways in which beneficiaries or other interested parties in an irrevocable trust can request that the Court modify its provisions. There are three specific ways to modify irrevocable trusts. First, using Section 456.4-412, RSMo., the Court may modify a trust’s terms if circumstances have arisen which were not anticipated by the settlor, and the modification will further the purposes of the trust. Second, irrevocable trusts may be modified if they are uneconomical under Section 456.4-414, RSMo. A trust is typically considered uneconomical if the value of the trust property is insufficient to justify the cost of administration. Third, if all of the beneficiaries consent under Sections 456.4A-411 and 456.4B-411, RSMo., irrevocable trusts may be modified or terminated. The modification may include the changes to the interests of some of the beneficiaries. The modification can include removal of beneficiaries. The modification can provide for termination of the trust at a time earlier or later than that specified by its terms.

If you need legal assistance, or for further information about an estate planning need, please contact us or call us at (573)686-2459. Our commitment is to earn your confidence by answering all questions and providing quality representation.