I Made an Irrevocable Trust a Long Time Ago: Can I Change it Now?
People make irrevocable trusts for many reasons, one major reason being tax planning. In order to make a completed gift for tax reasons, a donor has to part with control over the gifted asset, and making a gift to a trust that is irrevocable is one of the ways this can be accomplished. But that if your circumstances change, or tax laws change, and you would like to modify or terminate an irrevocable trust? Can a trust still be modified if it is irrevocable?
The answer is yes, if certain conditions are met. Florida statutes specifically allow for modification of irrevocable trusts in certain circumstances. For instance, by court order (Fla. Stat. § 736.0410), to modify tax provisions (Fla. Stat. § 736.04114), or where the trustee and all beneficiaries unanimously agree (Fla. Stat. § 736.0412), just to name a few. But there are certain situations where none of the Florida statutes apply. For instance, a modification under Fla. Stat. § 736.0412 by agreement of trustees and beneficiaries can only be accomplished if the settlor has passed away and only with respect to a trust that was made irrevocable after January 1, 2001. That leaves some situations that are not covered by the Florida statute.
Fortunately, Fla. Stat. § 736.0412 states, “The provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, terminate, or revoke trusts.” Estate planning practitioners have relied on this provision to modify irrevocable trusts under the common law. The common law of Florida states that, even while the settlor is still living, if the settlor and beneficiaries unanimously agree, an irrevocable trust may be modified. Because the common law rule applies to all irrevocable trusts, regardless of the date of creation, practitioners have often needed to rely on this rule in order to modify an irrevocable trust in Florida.
This common law rule was recently put to the test in a recent Third DCA case, Demircan v. Mikhaylov, wherein the court upheld that the common law rule was still valid: “The terms of a trust may be modified if the settlor and all the beneficiaries consent. Having the power to terminate, they obviously have the power to create a new trust or to modify or change the old. In Florida, this principle has long been recognized” (2020 WL 2550067 (Fla. 3d DCA May 20, 2020). The court confirmed that even if a particular situation does not fall within one of the methods for modification outlined in the Florida statutes, modification under the common law is still available:
“Nothing in chapter 736 modifies or abrogates the common law modification rule adopted in Preston. This is because, while ‘[s]ections 736.0410–736.04115 and 736.0412, Florida Statutes, provide means of modifying a trust under the Florida Trust Code … the sections on modifying trusts do not provide the exclusive means to do so.’”
(Id., citing Minassian v. Rachins, 152 So. 3d 719, 724 (Fla. 4th DCA 2014))
If you are interested in knowing more about irrevocable trust planning or revising your current irrevocable trust planning , contact the experienced attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist you with your estate planning needs. Reach Bart Chepenik, JD, LL M at 305-613-3548 (Cell) or Brad Trushin, Esq at 305-981-8889. We are accessible.