Is the Trust Set in Stone? - When Trustees Can (and Mostly Can't) Tweak the Plan After Death

Losing a loved one is a difficult time, and if you've been named a trustee of their trust, you're likely navigating a new landscape of responsibilities. One question that often arises is: "Can I, as the trustee, make changes to the trust now that the person who created it (the grantor) has passed away?"

The short answer, in most cases, is no. Once the grantor is gone, especially if the trust was a revocable living trust that has now become irrevocable, the terms of the trust are generally fixed. Think of it like the final chapter of a book – the story is complete. Your role as trustee is to follow the roadmap laid out in the trust document to manage assets, pay any necessary obligations, and distribute what remains to the beneficiaries.

Why the Lock-In After Death?

The primary reason for this inflexibility is simple: the person who had the power to change the trust – the grantor – is no longer here to give their consent. The trust document, created and potentially amended by them during their lifetime, now stands as their final instructions. During the grantor’s lifetime, the trust was revocable during their life: they key words here are during their life. Now that the grantor has passed and you’ve been named successor trustee, your duty as trustee is to honor those instructions.

However, Life Happens: Limited Exceptions to the Rule

While the general principle holds firm, there are some limited situations where modifications to an irrevocable trust might be possible after the grantor's death. These are often narrow exceptions and require careful consideration and, in many cases, legal or court involvement:

●      The Trust Document Itself Holds the Key: Smart estate planning sometimes includes built-in flexibility. The trust might grant a power of appointment to a beneficiary or even the trustee, allowing them to direct how assets are distributed within a specific group. It could also name a trust protector, an independent party authorized to make certain changes under specific, predefined circumstances – perhaps to adapt to significant changes in tax law or address unforeseen needs of the beneficiaries.

●      When Everyone Agrees (and It Doesn't Break the Core Purpose): In some states, if all the beneficiaries are adults, legally competent, and unanimously agree to a change, and if that change doesn't fundamentally undermine the original goals of the trust, a court might approve a modification through a petition procedure.

●      Non-Judicial Settlement Agreements (NJSAs): A Collaborative Approach: Many states now allow trustees and beneficiaries to work together on Non-Judicial Settlement Agreements. These agreements can be used to interpret unclear terms or even modify administrative aspects of the trust without needing a judge's approval, as long as it doesn't go against the core intentions of the trust.

●      Seeking Court Intervention: When Circumstances Demand Change: There are times where settlement is not permissible, even where beneficiaries all agree to the modification, such as when that modification would alter or destroy the material purpose of the trust. A court can step in to order modifications or even terminate an irrevocable trust in very specific situations, such as:

○      Unforeseen Events: If something completely unexpected has happened that makes it impossible or impractical to fulfill the trust's original purpose.

○      Furthering the Grantor's True Intent: If there's compelling evidence that the proposed change would actually better align with what the grantor truly wanted.

○      Fixing Mistakes: If there was a clear error in how the trust document was drafted.

○      Saving a Financially Draining Trust: If the trust assets are so small that the costs of managing it are outweighing any benefit to the beneficiaries.

●      Decanting: Pouring Assets into a New Container: A more complex option in some states is "decanting." This involves moving assets from the existing irrevocable trust into a new trust with different terms. This is a specialized legal maneuver with strict rules that should be overseen by legal counsel.

Trustees, Tread Carefully and Seek Guidance!

As a trustee, it's absolutely crucial to understand that you cannot simply decide to change the trust terms on your own after the grantor's death. Doing so can be a breach of your fiduciary duty to the beneficiaries and could lead to legal challenges and personal liability.

Here's the golden rule: If you, as a trustee, are considering any action that could be interpreted as changing the terms of the trust after the grantor's passing, DO NOT proceed without consulting experienced legal counsel.

Our firm specializes in trust administration. Together, we can:

●      Explain the specific laws in your jurisdiction.

●      Thoroughly review your trust document for any built-in flexibility.

●      Advise on the permissibility of modifications based on beneficiary consent or unforeseen circumstances.

●      Guide you through the proper legal procedures if court intervention is necessary.

●      Help you navigate Non-Judicial Settlement Agreements if that's a viable option.

●      Ensure you are fulfilling your fiduciary duties and protect you from potential liability.

The role of trustee carries significant weight. Don't navigate these complex waters alone.

Are you a trustee grappling with questions about administering a trust after the grantor's death? Our experienced trust administration team is here to provide the guidance and legal support you need. Contact us today for a consultation to discuss your specific situation and ensure you are fulfilling your duties correctly and protecting the interests of the beneficiaries.