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Revocable trust vs irrevocable trust

Hercules, CA |

My mother and stepfather set up a irrevocable trust. My mother now has dementia and has been deemed incable of signing legal documents; however my stepdad changed the trust to a revocable trust. He now has most of their assets going to his children and if she dies first he stands to get a substantial amount of money. If he dies first then she gets a small amount of assest and his children get the rest. What can I do?

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Attorney answers 4

Posted

Dear revocable vs irrevocable trust from Hercules, CA:
Hello. My name is Kelly Spegon. I am an attorney in St. Petersburg, Florida. Since you are in CA, I cannot provide legal advice but I hope this information helps. Do you have a copy of the Trust? If you do, you will want a knowledgeable attorney to review the Trust documents. The attorney will be looking for factors such as whether the Trust is valid and whether the Trust is amendable. Do you have any legal powers such as Power of Attorney, Trustee, Health Car Surrogate? Your post indicates that your mother has been deemed incapable of signing legal documents. By this do you mean she has been adjudicated incompetent by a Court of law or was this determined by a medical doctor? Has a legal guardian been appointed for your mother? If yes, was the family made aware of the guardianship proceedings? I would suggest you call a few attorneys licensed in CA and see if he/she would review your case.

Posted

I am not clear from your description what exactly occurred or when. The when is especially important. If your mother and stepfather set up an irrevocable trust, what were its terms? You state the irrevocable trust was changed to a revocable trust by your stepfather, how so? I understand you believe the planned distribution to be unfair, but the question is whether it is a plan your mother agreed to while she was still competent. If so, there's not much to be done. You need to have an estate planning attorney review the documents and facts to give you a better understanding of what, if anything, can be done at this point if your mother intended to leave additional assets to you than are reflected in the current plan.

Posted

By its nature, an irrevocable trust generally should not be subject to revocation, including material changes in terms which would defeat its original purpose.

It is typical, when doing estate planning for a couple with children from former marriages, to try to build some protection into the plan so that the children of one of the two are not short-changed. This might take the form of provisions in an irrevocable trust, or a testamentary agreement, limiting the right to alter reciprocal wills.

You have characterized the original trust as "irrevocable," but your next step should be to take a copy of the original trust agreement to an attorney having expertise in this area of the law, in your own state, and evaluate the extent to which the original trust document could effectively be changed.

Posted

To provide a competent answer we first need the facts. Once a trust is "irrevocable" then, by definition, it cannot become "revocable". Having said that, Probate Code Sections 15403 and 15404 provide mechanisms to chane otherwise irrevocable trusts.

Ultimately, as with most legal matters, this is a cost/benefit analysis. If you stand to gain $1,000, then it is not going to be worthwhile hiring a competent lawyer (whose retainer will easily be that much or more). By contrast, if you stand to gain $100,000 or more, then you should hire a competent estate planner or probate litigator. The lawyer will first ask for a copy of the trust. Then the lawyer will determine what you stood to gain under the trust and whether the changes were to your detriment and, if so, were done legally. If not, you will have a fight on your hands to regain your lost benefit.

§15403. Modification or Termination of Irrevocable Trust by All Beneficiaries.

(a) Except as provided in (b), if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court.

(b) If the trust’s continuance is necessary to carry out a material trust purpose, it cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing the material purpose. The court does not have discretion to permit termination of a trust that is subject to a valid restraint on transfer of the beneficiary's interest as provided in Chapter 2 (beginning with §15300).

§15404. Modification or termination by settlor and all beneficiaries

(a) If the settlor and all beneficiaries of a trust consent, they may compel the modification or termination of the trust.

(b) If any beneficiary does not consent to the modification or termination of the trust, upon petition to the court, the other beneficiaries, with the consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the beneficiaries who do not consent are not substantially impaired.

(c) If the trust provides for the disposition of principal to a class of persons described only as "heirs" or "next of kin" of the settlor, or using other words that describe the class of all persons who would take under the rules of intestacy, the court may limit the class of beneficiaries whose consent is needed to compel the modification or termination of the trust to the beneficiaries who are reasonably likely to take under the circumstances.

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