Trusts And Federal Estate Tax: Judicial Modification And Termination Of Trusts

Front 1

Trust terminates automatically according to its terms.

Back 1

Upon petition of a trustee or beneficiary, court may order that trustee be changed, that trust terms be modified, that trustee be directed to do acts that are not authorized, or prohibited from doing acts that are required by the trust, or that the trust be terminated, if one of the following tests if met:

Hint 1

1) purposes of trust/any provision thereof has been fulfilled or having become illegal/impossible
2) changed circumstances: unknown or unanticipated by settlor, modification/termination will further purposes of the trust
3) achievement of tax purposes- mod or termination necessary

Front 2

Termination of uneconomic trust: After giving notice to beneficiaries, trustee of a trust having a value of less than $50k may terminate trust w/o court approval if trustee determines that cost of administration doesn't justify continuation of trust

Back 2

Except for uneconomical (<$50k) trusts, modification or early termination of trust must be by court after hearing; can't be by extrajudicial agreement of parties w/one exception-->

Hint 2

Division of trust into 2 trusts, or merger of 2 trusts, can be accomplished w/o judicial proceeding

Division or merger can be done for any reason, but usually done for tax savings purpose

Front 3

In analyzing modification, ask..

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1) What was purpose of provision and/or restriction?

2) Do we have changed circ? Has purpose been fulfilled/become illegal/become impossible to fulfill?

3) Would modification of trust term further the accomplishment of the trust purpose?

Front 4

After trust terminates, trustee may continue to exercise trust powers for the reasonable time needed to:

Back 4

1) Wind up trust affairs
2) Make distribution to beneficiaries