Altering an Irrevocable Trust

[Taxing Matters]

3) if MOM is the grantor of the trust, i would even question the legality of the grantor having decision making abilities in an IRREVOCABLE trust. if i recall, the grantor needs to give up control in order to make it irrevocable ? i am not an expert on irrevocable trusts, so i am interested in what TM has to say about it

An irrevocable trust is simply one that cannot be revoked by the trust creator. There are nearly an infinite number of ways one can set up an irrevocable trust (though of course some are much better than others). Significantly there are a number of powers that the trust creator may reserve to themselves in the trust. For example, a popular power that the trust creator might have in the trust is the power to replace the trustee. Another power that is not uncommon is the power to change beneficiaries. Of course, reserving these kinds of powers can have other consequences. Some powers result in the trust being treated as a grantor trust under the Internal Revenue Code, for example. Whether that's a good or bad thing depends on the goals of the trust creator. Reserving too much power may render the trust subject to attack by the trust creator's creditors. So the right balance of trust powers for the creator depends very much on what the goals are and what state's law applies to the trust.

Comments please!!

Really there isn't much to tell you here. Your husband need to see a trust attorney to review the details of the trust, go over your mother's condition, etc. The exact language of the trust is critical and I've not read the trust. It also matters which state's law governs the trust — whether it is still domiciled in Colorado or is now domiciled in Indiana.

Ultimately, there may not be a lot your husband can do. He can refuse to agree to the changes, of course. Sounds like another brother is refusing to agree, too. If agreement of all the trust beneficiaries is needed to change the terms then refusing to sign off on the change will prevent that from happening. I wouldn't likely agree to a change that would allow the money to now go to the sister's boyfriend if I were in his shoes. But the thing is, if Mom is legally competent and and has the power to decide to make gifts to her kids however she wants, then she make out that $500,000 check to his sister and your husband likely could not successfully challenge that. If Mom is not legally competent, that's another matter.

Again, he really needs to sit down with an attorney. It all starts with reading every word of that trust.

 

[zddoodah]

Now sister threatened on the phone that if he didn't sign the document as it was written, she would "have Mom write (sister) a check today for $500K".

I would suggest your husband attempt to document this by sending his sister an email confirming the discussion they had and asking her to respond if she believes the description is not accurate.