Can You Amend an Irrevocable Trust?
Irrevocable trusts are an important estate planning tool. Many of our clients realize immediate tax savings by moving assets into an irrevocable trust. However, these trusts have certain disadvantages, one of which is trying to make changes to it.
At Millhorn Elder Law Planning Group, our estate planning attorneys meet with many clients who already have estate plans in place but want to update them. If you have an irrevocable trust you want to change, please meet with us. This is a complex area of law, and any error could have serious consequences.
Why Irrevocable Trusts Are Hard to Amend
There are generally two types of trusts—revocable and irrevocable. With the first, you can set up a trust and change it almost at will because you retain control over it. However, this control comes at a price. The trust assets still count as yours, and you realize no tax advantages because they have not been removed from your taxable estate.
With an irrevocable trust, by contrast, you permanently sign over assets to the trust. Doing so takes them out of your estate, which can benefit you in terms of taxes. You also can benefit should you be sued and a judgment creditor tries to seize them.
But irrevocable trusts also have disadvantages, and difficulties changing them is one. Fortunately, Florida lawmakers have long been attuned to the need to amend an irrevocable trust.
Why You Would Want to Amend a Trust
There are many reasons why a trust would benefit from an update:
- Fix drafting errors
- Clarify any ambiguity in the document’s language
- Change the trust to account for a change in the law
- Change where a trust is administered
- Combine trusts
- Increase investment options
- Add a spendthrift provision
These are some of the most common reasons to change the trust. If you have questions, contact an estate planning lawyer in the Villages.
Decanting a Trust
Florida’s legislature allows parties to fix a trust through a process called “decanting.” Florida statute § 736.04117 is the relevant provision, which has been broadened in recent years.
“Decanting” is the term for pouring assets from one trust into a different trust, much as you pour a bottle of wine into a new bottle. The new trust is written in such a way that it fixes the defect in the old trust.
Trustees with absolute power can typically decant a trust. But the legislature also now allows those trustees with limited authority to decant in certain situations. For example, you might want to pour assets into a special needs trust because a beneficiary now has a disability. The statute allows you to do this.
Decanting is an ideal way to amend a trust because you do not have to go through the courts. It is typically faster and easier, preserving the value of the trust. However, decanting is not acceptable in all cases. Please work with an experienced trust attorney in The Villages to analyze the best method for making changes to any trust that you have.
Contact Millhorn Law Today
If you amend the trust the wrong way, you could see a sizable tax bill in your mailbox. The trust beneficiaries could also be harmed. Reach out to an attorney at Millhorn Elder Law Planning Group to do this the right way. Our firm provides free consultations, which you can schedule by calling 800-743-9732.