• Services
  • Attorneys
  • Media & Insights
  • Online Payment
Results may vary depending on your particular facts and legal circumstances. No aspect of this advertisement has been approved by the Supreme Court of New Jersey. A description of the selection methodology can be found here.
  • About Us
  • Delivering Value
  • Diversity & Inclusion
  • Meritas
    A
    Alternative Dispute ResolutionAntitrust & Trade RegulationAppellate Practice
    B
    Banking & Financial ServicesBankruptcy, Creditors’ Rights, and Financial RestructuringBeer LawBusiness Law
    C
    Cannabis LawConstruction LawCriminal Defense
    E
    Economic Development LawElder Care & Special Needs LawElectronic Discovery ("E-Discovery")Environmental LawEstate Planning and Administration & Wealth PreservationExecutive Compensation and Employment Strategies
    F
    Food, Beverage & HospitalityFranchise Law
    H
    Health Care & Life SciencesHealth Care ProvidersHigher EducationHospitals and Health Networks
    I
    ImmigrationInsurance CoverageIntellectual PropertyIntellectual Property Litigation, Arbitration, and Dispute ResolutionIntellectual Property Portfolio Strategy, Management & LicensingInternational BusinessInternet Law
    L
    Labor & EmploymentLiquor Law, Licensing, Manufacturing, and DistributionLitigation
    M
    Media Law & Creative Economy PracticeMergers & AcquisitionsMunicipal Law
    N
    Non-Profit Law
    P
    Patent Preparation and ProsecutionPharmaceutical / Medical Devices / Pharma ServicesProducts and Consumer Liability DefenseProfessional LiabilityPublic Utilities
    R
    Real Estate, Finance, and Land Use
    S
    SecuritiesSolar Energy
    T
    TaxationTelecommunicationsTrademark & Copyright Protection & Enforcement
    V
    Venture Tech & Emerging Growth Companies
    W
    White Collar Investigations & DefenseWorkers’ Compensation
    • New Jersey
    • New York
    • Pennsylvania
    • Blogs
    • Articles
    • Podcasts
    • COVID-19 Resources

    Categories

    Beneficiary Rights Costs Guardianships Nursing Homes Other Probate Taxation of Trusts and Estates Uncategorized Undue Influence Will Contests Wills
    Blogs > Guardians of Your Will > Does It Matter if a...
    Member
    James J. Costello, Jr.
    Visit Profile

    Does It Matter if a Trust Is Revocable or Irrevocable? Yes, It Matters a Lot!

    Does It Matter if a Trust Is Revocable or Irrevocable? Yes, It Matters a Lot!

    A recent decision issued by the Supreme Court of Alabama highlights the importance, for both creators and beneficiaries of trusts, of understanding whether a trust is Revocable or Irrevocable, and the consequences that flow from that distinction.   

    Revocable and Irrevocable Trusts

    Any trust has three players: a Settlor, a Trustee, and a Beneficiary. The Settlor creates (or "settles") the trust, and the Trustee manages the trust assets based on written instructions from the Settlor (typically in the form of a Trust Agreement) for the benefit of a Beneficiary. A trust can be created during the Settlor's lifetime (a "Living Trust"), in which case the trust can be either revocable or irrevocable, or upon the Settlor's death, usually under the provisions of a Will (a "Testamentary Trust") which, because the Settlor is deceased, is always irrevocable.

    An Irrevocable Trust generally cannot be revoked or modified, exactly as the name implies. However, in some states (including New Jersey and Alabama), either the Trustee or a Beneficiary (not the Settlor) of an Irrevocable Trust may bring an action in court to modify or terminate the trust, or an Irrevocable Trust can be modified or terminated upon consent of the Trustee and all Beneficiaries if the modification or termination is not inconsistent with a material purpose of the trust.  

    The Alabama Case

    The Alabama case referenced above involved a Husband and Wife who in 2012 engaged in a common estate planning technique known as non-reciprocal SLATs, or Spousal Lifetime Access Trusts. Essentially, the Husband created a trust for the benefit of the Wife during her lifetime, and upon her death, the trust assets would pass to their three children; and the Wife created a trust for the benefit of the Husband during his lifetime, and upon his death, the trust assets would pass to the children.  

    The trusts were designed to utilize the couple's Federal Estate Tax Exemptions before those Exemptions were to be substantially reduced beginning in 2013 (which, as it turns out, did not happen), while retaining access to the underlying trust assets through their interests as beneficiaries. However, the Wife died in 2017. Accordingly, the assets of the trust that the Husband created for her passed to the children, thereby ending his access to the assets of that trust.  

    The Husband brought an action in court to have the trust rescinded (in other words, revoked) and the assets returned to him, claiming that he did not understand that the trust assets would pass to his children if his Wife predeceased him. The court, relying on the testimony of his attorney, who stated that the trust worked exactly as designed and explained to his clients, held in favor of the children. 

    It Matters a Lot

    The takeaway for Settlors of an Irrevocable Trust is that irrevocable means irrevocable; they cannot get back whatever money or property they transfer to the trust. The lesson for beneficiaries of those trusts is the same: if the Settlor has a change of heart after the trust is formed and funded, irrevocable means irrevocable.  

    If you have any questions about this post or any estate planning and administration matters, please contact me at jjcostellojr@norris-law.com.

    Member
    James J. Costello, Jr.
    Visit Profile

    Related Posts

    Undue Influence Can Unwind Lifetime Gifts When Is a Joint Account Not Really a Joint Account? When It’s for “Convenience Only.” I was Excluded as a Beneficiary, but Don’t Think it was Intended; am I out of Luck? Maybe Not!

    Share

    Tags

    #lifetime transfers #trust #trust agreement

    Helpful links

    • About Us
    • News
    • Services
    • Blogs
    • Attorneys
    • Articles
    • (COVID-19)
    • Award Methodology
    • Events
    • Join our Team
    Connect
    Online Payment

    Connect with Us

    • LinkedIn
    • Facebook
    • Twitter
    • Instagram
    • Youtube

    Join our growing team

    We are looking for quality attorneys to help us do more for our clients. At Norris McLaughlin, each attorney has the same opportunity to succeed whether you’re at the beginning of a career or pinnacle of the profession.

    Learn More

    Subscribe to our content

    Receive timely legal information delivered to your inbox

    This field is for validation purposes and should be left unchanged.
    © , Norris McLaughlin, P.A., All Rights Reserved. Attorney Advertising.
    VIEW OUR DISCLAIMER,  TERMS OF USE,  AND PRIVACY POLICY

    We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume you consent to our cookie policy. Learn more