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Can irrevocable trust terms be changed?

Irrevocable trusts are typically recognized in California as long as they are created in accordance with state law. As the name suggests, they generally cannot be changed or revoked after they are executed. However, there are certain circumstances in which this is not necessarily the case.

Trust assets are sold or allowed to lapse

If assets inside of the trust are sold or gifted to other parties, it would result in the trust becoming an empty vessel. The same would likely be true if it failed to make premium payments on a life insurance policy. Although the trust is still allowed to exist, it serves no purpose. Therefore, it will likely be seen as terminated for all intents and purposes.

Changes may be made for legal reasons

It’s possible that changes might be made to state or federal tax codes after a trust is executed. In such a scenario, the trust may need to be altered to account for those changes and remain in compliance with applicable law. A trust may also be altered or terminated if a judge finds that a change in circumstances makes it too difficult or expensive to administer. It’s worth noting that such a decision is typically only made if trustees or beneficiaries initiate trust litigation proceedings.

An irrevocable trust may be ideal if you want to shield assets from creditors, the government or a divorce settlement. However, it is important to understand that you essentially lose control of trust property in exchange for this protection. Furthermore, once this type of document is executed, it is extremely difficult to change its terms even if the trustee and beneficiaries agree to do so.