Explore what is possible when an irrevocable trust no longer fits.
Changed circumstances, administrative difficulties, or unintended provisions may call for a closer review of an irrevocable trust. We evaluate whether modification, reformation, or another available procedure can address the concern while respecting the trust’s purposes and applicable law.
A trust written for another time
Families sometimes find that an irrevocable trust no longer works as intended: circumstances have changed, a provision is unclear, or administration has become difficult. These situations can be sensitive, especially when family members see things differently. Before taking action or making commitments to other beneficiaries, please speak with us.
Why families ask for a change
- Circumstances the trust's creator didn't anticipate
- An older A-B trust that no longer serves the family
- Outdated trustee or distribution provisions
- Drafting errors or unclear terms
- Tax or administrative problems
- Combining or dividing trusts
The A-B trust that has outlived its purpose
For roughly three decades, from the 1980s into the 2010s, the A-B trust was a fixture of estate planning for married couples. At the first spouse’s death, the trust divided in two: a survivor’s trust and an irrevocable “bypass” trust. The design served a clear purpose. Before federal law allowed spouses to share their estate-tax exemptions, it was the principal way to preserve the first spouse’s exemption.
The law has since moved on. For deaths beginning in 2011, a surviving spouse may carry over a deceased spouse’s unused exemption through what is known as a portability election, and the exemption itself now stands far higher than when most of these trusts were signed. For many families, the bypass trust has become more burden than benefit.
- A second trust to maintain, with its own accounts and records
- Federal and California fiduciary income tax returns every year
- Generally no second step-up in basis at the surviving spouse’s death, which can mean a larger capital-gains bill for the children
In appropriate circumstances, a bypass trust may be modified or brought to an end, whether by agreement of the beneficiaries, by petition to the court or through another procedure California law provides. Whether that is prudent depends on the trust’s terms, the family’s circumstances and the tax consequences, which we evaluate with your CPA before recommending a course.
We evaluate the options and handle the process for you
Our office reviews the trust and the concern, explains the available approaches and, if a change is appropriate, prepares and manages it from start to finish.
- Reviewing the trust and what has changed
- Identifying the appropriate legal basis for a change
- Communicating with beneficiaries and seeking agreement where appropriate
- Preparing any agreement or petition and the required notices
- Representing you through court approval, when it is needed
- Trustees and beneficiaries of an irrevocable trust
- Families who agree a change is needed
Our trust modification services are provided as a complete engagement, with the scope and fees explained before we begin. We prepare any agreement or petition ourselves, so we can stand behind what is presented to the beneficiaries and the court.
“My parent-in-laws are Cantonese speaking only… Cynthia and her team explained the process to my parent-in-laws in Cantonese and helped me and their mostly English speaking son in English… I recommend Cynthia Lee for anyone who has parents who don't speak English as she has the cultural competency and patience to work with families of bilingual households.”
Testimonials describe individual experiences. Results depend on the facts and law applicable to each matter and will differ when those facts differ.
Can't we just amend the trust?
It depends on the trust. Some trusts, or parts of a joint trust, become irrevocable after a death, and an irrevocable trust usually cannot simply be amended. Depending on the change, the options may include beneficiary consent, a procedure that does not require the court, or a court petition. We review the trust and recommend the appropriate approach.
Do all beneficiaries have to agree?
Agreement can make the process simpler, but it is not always required and does not guarantee approval. The right approach depends on the change and the trust's terms.
Talk through a trust that no longer fits.
Meetings are by appointment, weekdays 9:30 AM – 5:00 PM, by Zoom or at our offices. Call 888.380.2288 or 415.693.8882, or request a time online. Consultations in English, Cantonese or Mandarin.