How to Terminate and Irrevocable Trust in Missouri
As many people know, a Trust Agreement can be drafted as either revocable or irrevocable. However, many people are unaware that the term “irrevocable” does not actually mean what it might imply! Here are several ways to modify or terminate an irrevocable trust under Missouri law:
ConsentIf the Settlor (i.e. creator) of an irrevocable trust and all beneficiaries agree to modify or terminate that trust (by written agreement), the trust may be modified or terminated without a court being involved, even if the modification or termination is inconsistent with a material purpose of the trust.
If the Settlor of an irrevocable trust is no longer living, the beneficiaries may still enter into a written agreement to modify or terminate the trust, but the agreement must first be approved by the Probate Court, which must be satisfied that no "material purpose" of the trust will be overridden. Modification and termination in this situation is generally more difficult to accomplish due to the court’s involvement.
Unanticipated CircumstancesA court may modify or terminate an irrevocable trust if, because of circumstances not anticipated by the Settlor when the trust was signed, such modification or termination will advance the purposes for which the trust was created. “Unanticipated circumstances” might involve a beneficiary falling into economic hardship due to mounting medical bills related to a serious injury or illness, or the subsequent incapacity of a beneficiary. In such situations, it might make sense to modify the trust to increase support for the beneficiary or even create a Special Needs Trust to avoid disqualifying them for government assistance (e.g. Medicaid).
"Cy Pres"If the particular charitable purpose of a trust becomes unlawful, impossible, or wasteful, a court may modify the terms of the trust to distribute the assets in a manner consistent with the Settlor's original charitable objectives. This is known as the “cy pres” doctrine (French for “as close as possible”). This doctrine usually comes into play whenever a charity named in the trust has ceased to exist.
UneconomicalIf the total value of a trust has fallen below $250,000, and the costs and expenses of administering the trust are at such a level that the trust will soon be exhausted, the trustee may terminate the trust and distribute the remaining proceeds outright to the beneficiaries. Before termination, the trustee must first give notice to the beneficiaries of the trustee’s intent to do so. This usually comes into play when the annual fees charged by the trustee are greater than the income received by the trust, and it has therefore become wasteful to continue administering the trust.