Trusts That Cry for AttentionTrusts That Cry for Attention
Over the past several years, a number of state law changes have caused the issue of trust modification/reformation1 to garner more and more attention from the Internal Revenue Service. First, many states and Washington, D.C. have adopted the Uniform Trust Code (UTC).2 The UTC contains a potpourri of provisions, making it significantly easier for parties to gain court approval of trust modifications.
Randi M. Grassgreen & Jane Caddell Paddison
Over the past several years, a number of state law changes have caused the issue of trust modification/reformation1 to garner more and more attention from the Internal Revenue Service.
First, many states and Washington, D.C. have adopted the Uniform Trust Code (UTC).2 The UTC contains a potpourri of provisions, making it significantly easier for parties to gain court approval of trust modifications. These provisions allow for a modification:
due to circumstances not anticipated by the settlor;3
made because the continuance of such trust on its existing terms would be impracticable, wasteful or impair the trust's administration;4
that a court concludes isn't inconsistent with a material purpose of the trust;5 and
made to achieve the settlor's tax objectives.6
Moreover, Section 411(a) of the UTC expands these modification rules by providing for the modification of an irrevocable trust, even if the modification is inconsistent with a material purpose of the trust, as long as the settlor and all the beneficiaries ...
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