Many people create a trust as part of their estate planning, but the term “irrevocable trust” can sound intimidating. You may wonder if it really means that the trust can never be changed. In Michigan, an irrevocable trust generally cannot be altered once it is established, but there are notable exceptions and important caveats to this particular part of estate law. If you have questions about your trust, continue reading and consult with a knowledgeable Middlesex County trust lawyer today.
What is an Irrevocable Trust?
A trust is a fiduciary relationship in which the owner of property or transferable rights gives a third party, the trustee, the right to hold and manage assets on behalf of a beneficiary or beneficiaries. This legal document can hold assets like money, property, investments, and more, and can outline how these assets should be distributed and handled by the trustee. The trustee is generally the same person as the grantor (the individual who creates the trust) until they pass away. Then the title of trustee is transferred to another person whom the grantor appointed.
In a normal, revocable trust, the grantor maintains control. However, an irrevocable trust is a type of trust where the grantor gives up ownership and control of the assets that are transferred into the trust. The grantor usually cannot modify or cancel the trust once it has been signed and funded.
Why Do People Choose an Irrevocable Trust?
While irrevocable trusts lack the flexibility that revocable trusts offer, they can provide other important benefits. For example, once assets are transferred into an irrevocable trust, they are no longer owned by the grantor and are therefore unavailable to creditors, business partners, or potential lawsuits.
Besides this type of protection, irrevocable trusts also offer lower federal estate taxes, help the grantor qualify for certain government benefits, like Medicaid, and provide long-term financial security for beneficiaries, among other things.
Can an Irrevocable Trust Be Altered?
If you are considering creating an irrevocable trust, you may wonder if they are truly unable to be changed. As a general rule, irrevocable trusts cannot be altered. However, there are certain exceptions
As described in Section 411 of Massachusetts General Laws, a non-charitable irrevocable trust can be modified or terminated if the court finds that the grantor and all beneficiaries consent to the decision. The court may approve this change even if the modification is inconsistent with the material purpose of the trust.
It could also be terminated with consent from all beneficiaries if the court concludes that the continuance of the trust is not necessary to achieve the material purpose of the trust or that the modification is consistent with the material purpose of the trust.
Even if not all beneficiaries consent, the court could still approve a modification if the trust could have been altered based on this law, had all beneficiaries consented, and the interests of teh beneficiaries who do not consent will still be adequately protected.
Estate law can be complex, so it is important that you consult with an experienced lawyer for skilled legal advice and representation.
