Modifying an Irrevocable Living Trust – Stephen Howard

Can an irrevocable living trust be modified in Utah?

Most living trusts in Utah are created initially as revocable trusts, meaning that they can be modified, amended, or revoked and terminated however the settlor (grantor) may choose to do. Some trusts are created initially as irrevocable trusts, and some become irrevocable only when conditions specified in the trust itself are met.

In general, an irrevocable trust cannot be changed or revoked. But the Utah Uniform Trust Code allows for some limited exceptions to this rule.

Modification of a Noncharitable Irrevocable Trust with Consent

Consent of All Beneficiaries & Settlor

Under Utah Code Ann. 75-7-411, a noncharitable irrevocable trust may be modified or completely terminated with the consent and agreement of both the settlor (grantor) and all beneficiaries. With consent, modifications can be made even if the changes are inconsistent with material purposes of the trust.

Unanimous Consent of Beneficiaries & Court Approval

In the absence of the settlor, a court can still approve termination of a noncharitable irrevocable trust if all beneficiaries consent, and if the court concludes that continuing the trust “is not necessary to achieve any material purpose of the trust.”

Similarly, a trust can be modified with consent of all beneficiaries if the court concludes that the modifications are “not inconsistent with a material purpose of the trust.”

Disagreement Among Beneficiaries

If not all of the beneficiaries agree to the proposed modification or termination of the trust, the court can still approve the changes if the court first determines:

that the trust could have been modified (as a matter of law) under one of the scenarios described above, if all of the beneficiaries had agreed; AND
that the interests of any beneficiary not consenting will still be adequately protected under the proposed changes to the trust.

Duties of Trustee Following Termination of an Irrevocable Trust

If a trust is terminated under section 411, the trustee is then required to distribute the trust property to the beneficiaries in the manner agreed to by those beneficiaries. As a practical matter, consent should only be given if there is agreement both as to the issue of whether the trust should be terminated AND on the way the property will be distributed.

Good Legal Advice When Drafting a Trust

It can be difficult to get the unanimous consent required so that an irrevocable trust can be modified without the intervention of the court. It can be even more difficult to go through the court processes necessary to approve a modification without unanimous consent. Care should therefore be exercised when creating a trust, both in determining the conditions under which the trust will become irrevocable and in anticipating situations likely to affect beneficiaries under the trust.