The term “irrevocable” generally means that a trust cannot be revoked or modified/amended. However, the Probate Code provides options to modify or terminate an otherwise irrevocable trust in certain circumstances. These Probate Code sections can provide some helpful flexibility during a trust administration.
When all beneficiaries agree
Probate Code Section 15403 states that if all beneficiaries consent, they can petition the court to modify or terminate an irrevocable trust, unless “…the continuation of the trust is necessary to carry out a material purpose of the trust…” Although, even here, the court has the discretion to modify or terminate the trust if the reason for modification/termination outweighs that material purpose.
If the beneficiaries are a class of persons (i.e., “heirs” as opposed to specific individuals), the court may limit the class so that the number of people that must consent does not become unreasonable.
When the settlor and all beneficiaries agree
The settlor (or “grantor”) is the person who sets up the trust in the first place. Under Probate Code Section 15404, if this person, along with the beneficiaries, agree to the modification or termination, they may do so by written agreement. For some people, this option is less desirable because it does not carry the weight of a court order.
If any beneficiary does not consent, the others may still petition the court for the same relief. The court may grant the petition so long as the interests of the non-consenting beneficiaries are not “substantially impaired.”
Again, the court may limit the class of beneficiaries if necessary.
When continuation of the trust is no longer economical
Probate Code Section 15408 allows for termination or modification, upon petition to the court, when the costs of administration outweigh the economic benefit of the trust. (If trust principal is $50,000 or less, the trustee can terminate the trust on their own.)
When circumstances have changed
Sometimes, by the time the trust is administered, the circumstances under which the trust was originally created have changed. If this happens, and administration of the trust as drafted would defeat the purpose of the trust, the court can terminate or modify the trust terms on petition by a trustee or beneficiary. The authority for this is Probate Code Section 15409.
One of the main purposes of a trust is to avoid the probate process (and the courts altogether). But sometimes it can be very useful to seek the court's assistance. The Probate Court has broad authority for regulating the administration of trusts, once the trust is brought under its jurisdiction. If you need help from the court regarding a trust administration, there is a wide variety of petitions you can file.
Helix Law Firm can help with trust disputes
Whether you are a trustee, a beneficiary, or a disinherited beneficiary, we can evaluate your case and determine if there is a solution, either by written agreement outside the courts, or by filing a petition in Probate Court.
If you're interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.