Trust Modifications & Amendments
Trusts can be divided into two categories: revocable trusts and irrevocable trusts. As the name suggests, irrevocable trusts generally cannot be amended or modified by the settlor (the creator of the trust). Revocable Living Trusts are usually freely modifiable and amendable. However, a revocable living trust, upon the death of the settlor(s), will become irrevocable — and thus un-amendable. The fact that it became irrevocable sometimes saddled beneficiaries with burdensome duties, unfavorable distributions, and even led to malpractice suits against attorneys for errors that could not be corrected.
Because of these problems, Missouri overhauled its Trust Code and vested in courts liberal authority to modify trust agreements. To alleviate malpractice concerns, a court may reform a trust to conform to a settlor’s intention if there was a mistake based on fact or law. Further, a court may outright modify and amend a trust agreement if (1) unanticipated circumstances have arisen which render it impossible to administer a trust effectively, (2) if the trust administration has become uneconomic relative to its corpus, (3) to achieve the settlor’s tax objectives (i.e., almost always minimize tax exposure), or even (4) outright terminate a trust in certain circumstances.
Such broad power the courts wield over trusts has caused controversy. Many are not happy that a Missouri Court can quite easily modify and augment a decedent’s wishes and alter the trustees and distribution arrangements. On the other hand, some applaud the legislation saying that a decedent’s say over his or her property vanishes upon death, and thus a dead hand should not still be controlling what is happening with property (the Earth belongs to the living, as Thomas Jefferson said).
Regardless of your policy views in this regard, it is certain that Missouri Courts do have more power to modify/terminate trusts. Good for attorneys and beneficiaries, maybe not so much for settlors.