By definition, an irrevocable trust cannot be amended, modified, changed, revoked, or terminated. However, the Minnesota Trust Code grants probate courts authority to alter noncharitable irrevocable trusts in specific circumstances. Before the Trust Code was implemented in 2016, Minnesota statutes did not provide guidance to probate courts for modification or termination of trusts.
The governing statutory provisions are found at Minn. Stat. §§ 501C.0410 – 501C.0417. There are eight different sets of circumstances in which Minnesota probate courts have authority to modify or terminate a noncharitable irrevocable trust:
Charitable irrevocable trusts are subject to different rules than noncharitable trusts.
If the settlor (creator) of a trust and all beneficiaries agree, the probate court may grant termination or modification of a noncharitable irrevocable trust. Modification by consent can be granted even if it is inconsistent with a material purpose of the trust.
For purposes of a consent modification or termination by consent of the settlor and beneficiaries, the settlor’s consent may be exercised by:
If all beneficiaries consent to modification or termination of a trust, the court may grant the request if these specific findings are made:
If all beneficiaries do not consent to a proposed modification or termination, the court may still approve the request if the judge finds that:
Spendthrift provisions in a trust do not preclude the court from modifying or terminating a trust. If a trust is terminated by consent, the trustee distributes the trust property according to agreement of the beneficiaries.
The probate court has authority to terminate a trust or modify administrative or dispositive terms of a trust, if the court determines that “because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust.” The modification must be accomplished in accordance with the settlor’s probable intent to the extent practicable.
In addition, the probate court has authority to modify administrative terms of a trust when continuing the trust under its terms “would be impracticable or wasteful or impair the trust’s administration.”
If a trust is terminated under these provisions, the trust property is distributed as determined by the court’s order.
If a trust has a value of less than $50,000, and the trustee concludes that the trust property value does not justify the costs of administration, the trustee can request termination of the trust. Qualified beneficiaries must be notified.
If the probate court determines that the value of trust property does not justify the costs of administration, the court has the authority to modify or terminate the trust, or remove the trustee and appoint a different trustee.
This provision does not apply to an easement for conservation or preservation. If a trust is terminated under this provision, the property is distributed in accordance with the purposes of the trust.
Even if the terms of a trust are not ambiguous, the probate court has the authority to modify the terms of the trust if “clear and convincing evidence” proves:
If not contrary to the settlor’s probable intention, the court has authority to modify the terms of a trust to achieve the settlor’s tax objectives. The court can give the modification retroactive effect.
A trustee is permitted combine multiple trusts into one or divide a single trust into multiple trusts. Qualified beneficiaries must be notified. The result of the combination or division cannot adversely affect achieving the purposes of the trust or negatively impact the rights of any beneficiary.
In addition to specific situations in which a trust can be modified, the Trust Code provides that a trust terminates when:
The Trust Code provides that a trustee or beneficiary may petition the probate court to modify or terminate a trust or for combination or division of trusts. Where modification or termination is by consent, the settlor (creator of the trust) may also initiate the petition.
A proceeding under any of these provisions begins with a petition filed in probate court, asking the court to grant the modification or termination. The request is a formal court proceeding. The judge will hold a hearing, at which documentary evidence and witness testimony in support of the petition will be introduced. The evidence must establish the factual and legal basis for the request.
The petition is a type of trust litigation. In some circumstances, the request may be opposed. Whether or not there is opposition, a petition to modify or terminate a trust should only be filed with the assistance of an experienced trust litigation attorney. The proceeding is not one that a trustee, beneficiary, or the settlor should attempt to navigate on his or her own behalf.
At the Dave Burns Law Office, a focus of my practice is trust and probate litigation, including petitions for modification or termination of a trust. I work with trustees, settlors, and beneficiaries of trusts and estates.
If you are a trustee, beneficiary, or settlor needing assistance with a trust modification or termination matter, I welcome you to contact me at (612) 677-8351 or by emailing firstname.lastname@example.org. I work with clients throughout the Twin Cities metro area and am available to meet with clients in both Minneapolis and St. Paul.