According to current estate laws, irrevocable trust funds, once established, can't be easily modified by any party. People typically set up irrevocable trusts to ensure that beneficiaries receive their share of the estate as planned.
The stable structure of an irrevocable trust will make it harder for unnecessary changes to be made—changes that may ultimately affect what your beneficiaries get. However, there are cases where an irrevocable trust also needs to be modified.
What happens if all the beneficiaries you listed end up passing away? And what if you established a condition that's impractical, illegal or wasteful? Adjusting the terms of a trust is possible in the following ways.
Via modification, if the current terms are impractical or unreasonable
Perhaps the most common reason why irrevocable trusts are adjusted is that the current terms can't be reasonably implemented. For example, if all beneficiaries listed have passed away or if the assets listed under the fund no longer exist, the terms can be adjusted to something more practical.
Adjustments can also be carried out in cases where implementing the trust would be wasteful. With the help of an estate planning lawyer, terms of the trust can be modified to something reasonable, or the trust may be terminated accordingly.
Via a formal agreement
In limited cases, the trustee and beneficiaries of an irrevocable trust could agree to change some of the terms involved. For example, the beneficiaries named, the duration, and the structure may be modified within reasonable limits. But most material-related clauses would be difficult to adjust because an irrevocable trust is meant to safeguard property allocations.
Transfer or combine with a different trust
Another way of adjusting the terms is by combining two or more trusts. You may also be able to divide one trust into multiple ones—depending on what your specific goals are.
However, such modifications must be allowed by the court. You may also need to involve your beneficiaries when making this decision. An estates lawyer will help you decide and plan how to divide/combine several trusts.
Correction of legally inadmissible provisions
In some cases, your trust may contain clauses or provisions that can't be implemented under current laws. Remember that all statutes within the terms of your trust fund should conform to established guidelines. If the terms can't be legally implemented, you'll need to adjust them accordingly.
The take-home message is that irrevocable trust funds need to be practical and feasible to implement. If the fund doesn't meet essential legal guidelines, it can be adjusted as appropriate.