Changing Irrevocable Trusts In California

An irrevocable trust is one that usually cannot be amended, changed or revoked. Trusts can become irrevocable in several ways.

Some trusts for married couples become irrevocable at the first spouse’s death. A common example is an A/B trust, sometimes called an Exemption Trust or a Bypass Trust. With this type of trust, the deceased spouse’s trust becomes irrevocable after the first death and cannot be amended, changed or revoked.

Irrevocable life insurance trusts and qualified personal residence trusts are made to be irrevocable at the time they are created. The life insurance trust is a type of trust that is created to hold life insurance and pass the insurance death benefit to the beneficiaries of the trust without any income or estate taxes on the placement of the policy in the trust or upon the insured’s death. Such a trust cannot be revoked, changed, or amended after it is created except by court order.

There are some times, however, where an irrevocable trust can be modified by court order. California Civil Code Section 3399 permits a contract like a trust to be reformed when the writing, through mistake or fraud, fails to express the intent of the parties. For instance, reforming a trust might be appropriate when due to a drafting error or scrivener’s error.

California Probate Code Section 15409 also permits a trust to be changed if “owing to circumstances not known to the settlor (person creating the trust) and not anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially limit the accomplishment of the purposes of the trust.” In this situation, what the court can do is extensive. The Probate Court can authorize acts that are forbidden by the terms of the trust or not authorized.

Under California Probate Code Section 15403, when all beneficiaries of an irrevocable trust consent to modification or termination of a trust the court can permit that to occur unless the court finds that a material purpose remains for continuance of the trust and that purpose outweighs the arguments for termination or modification.

Speak to a tax attorney about amending, changing or revoking an “irrevocable” trust. Call Mitchell A. Port at (310) 559-5259.