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What if a trust is written such that it may be revoked, but the trust is silent on whether the trust may be amended?

A basic tenant of trust law is that the trustee must administer the trust in the manner proscribed in the trust. This would seem to foreclose the ability to amend the trust if the instrument does not provide for amendment. But, if the trust provides for revocation, an implied right of amendment is also provided, as long as the trust does not explicitly say otherwise.

A trustee is obligated to administer a trust in accordance with the trust terms. However, when the settlor of a trust has the power to revoke, she also has the power to amend the terms of the trust.

This is because a power to revoke a trust also includes the ability to modify or amend the trust instrument. Such is stated in Restatement (Third) of Trusts § 63 cmt. (g). In order to avoid construing documents ridiculously strictly, most courts have ruled the power to revoke implies a power to modify (IE amend) the trust instrument; If the courts required the more cumbersome process, the settlor would be required to revoke the trust, and then create a new trust with the desired amendment, while restating the original trust. This would be a very inefficient way to do estate planning and the courts do not require it, thus a revocable trust can be amended.

The Uniform Trust Code (UTC) has a similar rule (UTC § 602) stating that a trust is both revocable and amendable unless the trust instrument expressly provides otherwise. A "power of appointment" also allows a trust to be revoked or amended via a will except where the trust instrument explicitly disallows the power of appointment.

Contrast this analysis to the situation where the trust is irrevocable yet some attorneys feel compelled to amend the trust, which is not enforceable.

Some attorneys state that a trust which allows for draining of the principle implies a right to amend the trust, even if the trust states that it may not be amended. Courts have held that an implied right to amend does not exist where the trust explicitly forbids it. Why would there be an implied right when the trust explicitly states otherwise?

Caselaw under Crook v. Contreras 95 Cal.App.4th 1194 (Cal. Ct. App. 2002) supports the analyses above. The court held that "the trust instrument expressly prohibited Florence from revoking, modifying or amending the trust instrument in any respect whatsoever after Lumir's death, and no statute permitted Florence to do what the trust instrument precluded. Nevertheless, Contreras argues that Florence's power to withdraw all or part of the assets of Trust A during her lifetime impliedly permitted her to revoke Trust A, and this implied power to revoke included a power to amend. The crux of his argument is his assertion that Florence's power of withdrawal gave her the power to revoke notwithstanding the trust instrument's express preclusion of revocation."

If you would like assistance interpreting your trust, or drafting one, please contact me. Likewise, if you would like assistance enforcing trust provisions through litigation (or pre-litigation), please call Don Bushell at 206-240-7676.

What if a trust contains a "power of appointment"?

It is common to find a "power of appointment" outlined in a trust instrument. This language allows the maker (the "settlor") of the trust to change the distribution of the assets upon the settlor's death pursuant to the settlor's will. This can be very confusing to families dealing with this difficult situation. Many times, the settlor of the trust does not realize this power exists in the trust, and such language never makes it to the will, which makes the language in the trust instrument referencing the power of appointment useless.

A power of appointment in a trust might read "the settlor has a power of appointment of his or her assets to any of his or her natural born children, but in the absence of the exercise of such power, the assets go to the XYZ Charity." This language means that the assets of the trust will go to the charity unless the settlor changes his or her will and states that the "power of appointment granted in the trust is hereby exercised to give 50% of my assets to my youngest child, and the remainder split equally among my other natural born children" (as an example). This would be a valid exercise of the power of appointment. The settlor could potentially amend the will numerous times, changing the terms of the exercised power each time, and the last effective change would validly exercise the power of appointment.

In this example situation, the power of appointment can only be exercised in favor of the natural born children and not to anyone else; any property appointed elsewhere is not effective and goes instead to the default listed in the trust, in this case the XYZ charity.

The Restatement (Third) of Property: Wills and Other Donative Transfers § 19.14 (2011) states that the donee of a special (nongeneral) power can appoint the property over which the power is exercisable only to “permissible appointees” or “objects” of the power. See also Restatement (Second) of Property: Donative Transfers § 19.3. Permissible appointees are “the persons to whom an appointment is authorized.” Id. § 17.2(c). Appointments to impermissible appointees are invalid. Id. § 19.15.

If you want the assistance of an experienced wills and trusts attorney on your side, please call Don Bushell, attorney at law. He is licensed in Arizona, California and Washington state.