Trust Modification and Termination

Modification

A court will modify a trust where the trust’s leading purpose is frustrated by a specific directive made by the trustor. In such instances, the directive will be struck in order to accomplish the trustor’s primary intention.

When a trustor provides no power to invade the principal and the income generated by the trust is insufficient to support the beneficiary, a court may allow a distribution of income. Such distribution is allowed only if the beneficiary’s support or education is not sufficiently provided for and if the trust’s purpose cannot be attained without the distribution.

Termination

A trust ends automatically at the end of the time specified in the document that created it. If a trustor has reserved the power to revoke a living trust, he may do so at any time. If a living trust is not revocable, the trustor and all the beneficiaries have to consent to revocation. If any beneficiary is a minor or is incompetent, the trust cannot be revoked because minors and incompetents cannot, by law, give consent. Any revocation of a living trust must be in writing and signed, acknowledged, or witnessed in the same manner as was required to create the trust. Notice of the revocation should be delivered to the trustee in a reasonable time, but failure to deliver such notice does not affect the validity of the revocation.

Even if all the beneficiaries consent, a testamentary trust cannot be terminated if the termination would be in contrast to the purposes of the trustor. In those jurisdictions that automatically give limited spendthrift protection to all income interests, courts cannot terminate a testamentary trust upon application by the beneficiaries because to do so would frustrate the primary purpose of giving spendthrift protection to the beneficiaries. Testamentary trusts in which the beneficiaries are allowed to transfer their interest may be ended by them if no other material purpose of the trustor is to be served.