The Times They Are A-Changin': How Your Irrevocable Trusts Can Change With Them

As family circumstances, tax laws and asset protection needs continue to evolve, irrevocable trusts that made sense even a few years ago may quickly become inefficient or undesirable. Fortunately, a selection of trust modification options, including nonjudicial settlement agreements, nonjudicial consent modification agreements, judicial modification and trust decanting, offer significant opportunities—but just as many traps for the unwary. At the North Carolina Bar Association's 38th Annual Estate Planning & Fiduciary Law Program, Jessica Mering Hardin presented a session that reviewed available modification mechanisms and the practical considerations involved in implementing the various strategies. Several case studies illustrated and explored issues involved in modification of existing trusts, including older Rule Against Perpetuities trusts, preserving the valuable “grandfathered” status of pre-Sept. 25, 1986 generation-skipping trusts, avoiding (or deliberately springing) the Delaware tax trap, gift tax implications of actual and virtual representation, and modifications causing change to grantor trust status.