An irrevocable trust is a legal arrangement where the person creating the trust (called the settlor) permanently transfers assets and gives up the right to modify or terminate the trust. Once created, you typically can’t change or cancel it. But life changes, and sometimes these trusts need updates too. California law offers ways to modify them when necessary.
Judicial modification
Courts can change an irrevocable trust, but only when the trust no longer works as planned. For example, if a trust creator established a trust to maintain a family vacation home that later became unsafe to live in, the court might approve changes to better help the family.
Either trustees or beneficiaries can ask the court for these changes. The court looks at these key points:
- The current situation must be something the trust creator did not anticipate.
- Keeping the trust unchanged would hurt its purpose.
- The proposed changes must match what the trust creator wanted.
- The changes must help the trust work better for everyone involved.
Court approval requires clear proof that modifications are necessary and align with the original trust goals. The court carefully reviews each petition to ensure it protects both the trust’s purpose and its beneficiaries.
Consent modification
A second way to change an irrevocable trust happens when all beneficiaries consent to the same changes. However, the court reviews these requests carefully, focusing on whether the changes would interfere with a material purpose of the trust. They will also consider whether there’s good cause to modify the trust if it contains transfer restrictions.
Decanting
This means moving assets from an existing trust into a new trust with better terms. The trustee can move all or some assets to a new trust without going to court. However, they must:
- Check if the original trust allows for such transfers
- Make sure the changes match the first trust’s basic purpose
- Give notice to all key people – such as the trust creator (if alive), current beneficiaries and future beneficiaries – at least 60 days before making changes
- Explain the reasons for the changes in writing
The trustee must act in everyone’s best interests, and the new trust can’t take away basic rights from beneficiaries.
Adapting to changing needs
If you’re struggling with an irrevocable trust that no longer serves its purpose, an attorney can help you understand your options and find a path forward.