Estate planning using Wills in Pennsylvania is relatively simple, all things considered, and is the most common framework for most families and individuals. However, sometimes those same individuals or families might feel a need for a trust. The idea’s origin could come from reading an article or attending a program on trusts or from hearing that trusts are helpful in resolving problems such as asset protection or avoiding probate, although probate in Pennsylvania is not as complicated or expensive as in some other states. There is a great deal of misinformation regarding the subject of trusts. Often the person who requests the information may be unaware why a trust might be needed or what type of trust. One of the services our office performs is to walk clients through alternatives so they can make informed decisions whether to remain with a traditional Will or move to trust based planning.
Trusts come in different types and for different reasons. They may be irrevocable or revocable. They might be so-called grantor trusts or non-grantor trusts. They might be considered to deal with special needs or a beneficiary with substance abuse problems or serious difficulties with creditors. They might take effect during lifetime or only on death and be contained in a Will.
The fact is sometimes a Trust, once established, might need to be changed. Can it be? As with most legal questions, the answer is “it depends.” Suppose the person who established the Trust has died. Many trusts become irrevocable on death of the Trustor for the simple reason she cannot modify it after she died. But what if all the beneficiaries agree the Trust should be changed? This is where specific laws become involved.
If the person who established the trust is still living, many trusts can be changed without a Court proceeding. If the Trustor, the person who established the trust is deceased, there may still a way to modify a trust in some cases, even a so-called irrevocable trust.
The Uniform Trust Act which, in its Pennsylvania version was adopted in 2006 allows more flexibility when it comes to trusts than the laws previously allowed and it states specifically the procedure to follow in certain circumstances. Now, even irrevocable trusts might under some circumstances, be modified, reconfigured or even dissolved. Actions might require a Court proceeding or not. This is a good thing to know because often conditions change for reasons the Trust maker might not have intended.
The question for many people is why should they care? Here are some examples.
You might be the beneficiary of a trust established long ago by a grandparent that has very restrictive provisions on distributions or the administrator of your trust could be a financial institution that has changed hands many times or is located in another state and is unresponsive or you disagree with investment decisions and you and other beneficiaries want to retain another Trustee. There are now specific rules that provide a road map how to do this.
If the person who established the Trust, is still living, many provisions of a Trust may be changed by written agreement of the Trust maker and all the living beneficiaries without going to Court. Also as to Revocable Living Trusts, these typically can be changed at any time during the lifetime of the individuals who made them.
The Trust might specify certain types of investments and the instructions could be outdated. The Trust might no longer be needed because of changing conditions or there might not be enough in the Trust to make its administration worthwhile. There are provisions in the Act to cover these possibilities.
The Trust may have been drafted such that, with changes in the law, it can no longer accomplish its goals. The law states that a court may modify the trust under some circumstances or even terminate it if because of circumstances that apparently were not anticipated when it was written, trust purposes would be furthered by making the change. Section 7740.2, UTC Section 412.
Under the Act, notices to beneficiaries and agreement among the parties might replace going to Court in some cases and provide more flexibility to beneficiaries and families.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.