An Irrevocable Trust is not a good idea for most people. This is because the ‘settlor(s)’ (the person(s) who own the Trust) may want to make changes to it over time. It is difficult to make changes to an Irrevocable Trust. It is simple and easy to make changes to a Revocable Trust and it does not require a court procedure.
Most Estate Planning Attorneys only prepare Revocable Trusts. The reason for this is simple. With a Revocable Trust, the ‘settlors’ can change it as they wish over time. A settlor may change a Trust based on a change in circumstances or a change in desire. The reason is not important. What is important is that the settlor(s) is of ‘sound mind’ and understands what he or she is doing. Usually an Attorney will speak with the settlor in his/her office alone and determine that the settlor is fully aware of the change and wishes to do it.
A settlor(s) may wish to make a change to the beneficiaries or to the list of Trustees. For a change to the beneficiaries, the settlor may wish to disinherit a beneficiary or a number of beneficiaries. He/she may wish to add beneficiaries or change the percentage of the asset(s) that may be received. In addition, the settlor(s) may wish to change the successor Trustees and replace the list or change the order of the Trustees. The settlor(s) may want other changes as well. Changes to a Revocable Trust does not require a court appearance.
However, an Irrevocable Trust requires court approval for any and all changes. When all beneficiaries are in agreement with the change, the court may approve them. However, when there is disagreement, the court will examine whether there was a mistake in some of the provisions. The judge will also examine factors such as original intent or fraud or other misconduct.
Irrevocable Trusts can be useful tools for some, but they can also cause problems. The recent court case involving a dispute between the conservative media empire owner and billionaire Rupert Murdoch and his 4 oldest children is a case in point. Rupert Murdoch wanted to make a change to his Irrevocable Trust. The current Irrevocable Trust had given each of his 4 oldest children equal control of the news empire as well as equal share in the revenue. Now, at the age of 93, Mr. Murdoch wishes to change the current Trust and give control of his vast assets to his oldest son Lachlan who would maintain the right-wing editorial slant of his news programming. He insists that this decision will maintain the percentage of revenue that each of his 4 oldest children will get.
Nevertheless, the other 3 children wish to have equal control in the running of the news empire even though, and because, their views are not as ‘right wing’ as those of the oldest son Lachlan. This is a problem for Rupert Murdoch. He feels that the empire that he has built will be diminished if the conservative slant is not maintained.
However, a Nevada commissioner did not agree with Murdoch and ruled that the changes to the control of the news empire should not be allowed. Murdoch will appeal the decision and we will have to wait to see if the decision changes on appeal.
Most people do not have the assets that Rupert Murdoch has. An Irrevocable Trust makes it very difficult and costly to change any of the provisions in it. In contrast, the provisions in a Revocable Trust can change easily and without court approval (as long as the settlor(s) is of ‘sound mind’).
When you have questions about a Trust give us a call @ 818-246-0073. We’re here to help!
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