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There are a variety of reasons why it may be beneficial for Gilbert residents to put some or all of their assets into a trust and let them be managed by a trustee. If they do so in the form of a revocable trust, they can modify the terms of the trust or the assets within it at any time or terminate the trust completely if they wish.
Although possible, irrevocable trusts are much harder to change after they are created. Regardless of your specific situation, a qualified trust and estate attorney can help guide you and explore your options for trust modification and termination in Gilbert.
There are two basic types of trusts that a person in Arizona may put their assets into prior to their death. Each type of trust has different benefits and drawbacks, as well as different options for modification and termination that a Gilbert, Arizona resident could take advantage of.
A revocable trust is a fairly flexible legal instrument that allows its owner to easily adjust the terms by which the trustee must eventually abide. The owner of a revocable trust can change almost any aspect of that trust that they wish: what assets are included or not included, how assets within the trust should be managed by the trustee, and which beneficiaries may be eligible to receive trust assets upon the owner’s death. In the same vein, they can also terminate the trust at any time without any major legal hurdles.
However, while this flexibility can be beneficial in many respects, it also opens up the trust’s owner to financial liability. Creditors can pursue and liquidate assets within a revocable trust if the owner is sued, and any assets within a revocable trust would have state and federal taxes taken out of their value before distribution after the owner’s death.
Generally, neither the assets within an irrevocable trust nor any income generated by those assets can be taxed upon the owner’s death. These trusts are meant to remain in place in exactly the form they originally held until the assets within are distributed in accordance with the owner’s instructions.
However, there are a few ways in which an irrevocable trust in Gilbert could still undergo modification or termination. The simplest is to include terms in the original trust document that specifically allow the trustee to modify or terminate the trust under specific circumstances.
Alternatively, Arizona Revised Statutes §14-10111 allows an irrevocable trust to be modified or terminated through a binding nonjudicial settlement agreement. This option is only available if the proposed change does not violate the trust’s material purpose and if approved by a probate court.
Lastly, it may be possible to seek a probate court order to amend or terminate an irrevocable trust if certain conditions apply. A Gilbert estate planning attorney could clarify for an individual trustee or trust owner whether their situation meets the criteria for this modification strategy.
Changing the terms of an existing trust can be tricky depending on the type of trust involved and what changes are to be made. Either way, it is generally a good idea to seek help from knowledgeable legal counsel when pursuing any kind of modification or termination of trust in Gilbert. For more information or to schedule a complimentary initial consultation call one of our Trust Modification Attorneys today.
