Modification/Termination

Question 1

Modification (Majority View)

Answer 1

trust can only be modified by the settlor who:

1. expressly reserved the power to modify the trust; or
2. has the power to revoke or amend the trust

Question 2

Modification (Minority View)

Answer 2

settlor is free to amend or revoke a trust UNLESS the trust states otherwise

Question 3

Modification (UTC)

Answer 3

a trust may be modified:

1. by the settlor;
2. if settlor and beneficiaries consent;
3. the beneficiaries’ consent + modification is NOT inconsistent with trust purpose;
4. it will further the trust purpose because of unanticipated circumstances;
5. the cy pres doctrine applies;
6. court determines the value of the trust is insufficient to justify its administration + notice to all beneficiaries; OR
7. it’s necessary to conform the trust to the settlor’s intent

Question 4

A court may modify the terms of a trust if:

Answer 4

1. continuing the trust is impractical or wasteful; AND
2. the modification furthers the trust purpose because of unanticipated circumstances

Common Law - ONLY administrative provisions may be modified
UTC - dispositive provisions may be modified when circumstances arise that were not anticipated by the settlor

Question 5

UTC - Trust may be terminated if:

Answer 5

1. it’s revoked or expires pursuant to its terms;
2. it’s material purpose is achieved;
3. it becomes unlawful, contrary to public policy, or impossible to achieve;
4. the settlor + all beneficiaries consent;
5. all beneficiaries consent + court decides that continuance is not necessary to achieve the trust purpose;
6. termination will further the purpose of the trust because of unexpected circumstances;
7. the cy pres doctrine applies; OR
8. the value of the trust is insufficient to justify the cost of administration

Question 6

Conditions on Marriage/Divorce

Answer 6

VOID against public policy if prohibits FIRST marriage or requires divorce

Question 7

Most jurisdictions permit termination of a trust by its beneficiaries only if _________ consents and the modification will not ________ with a _______________ of the trust.

Answer 7

all of the beneficiaries; interfere; material purpose

Question 8

Although permitted by the UTC, most states do NOT permit a _______ to consent to the termination of a trust on behalf of ______________.

Answer 8

guardian; unborn beneficiaries

Question 9

the court will NOT terminate a trust when doing so would …

Answer 9

interfere with the material purpose of the trust

Question 10

the presence of a _______________ precludes termination of a trust because it shows the settlor’s purpose and manifest his …

Answer 10

spendthrift provision; lack of confidence in the judgment and management ability of the beneficiary

Question 11

a court can terminate a trust prior to the time fixed in the instrument if …

Answer 11

the trust purposes are accomplished early or the trust purposes become illegal or impossible to carry out.

Question 12

under the doctrine of changed circumstances ….

Answer 12

a court generally cannot change the beneficial rights of the beneficiaries.