In Florida, courts are now permitted to judicially modify an irrevocable trust even when a trust is unambiguous.
Historically, courts held the belief that the intent of the settlor, the person who creates a trust, should only be determined from the actual language of the trust document. This belief led courts to only modify a trust when the trust’s purpose, or provisions within the trust, were found to be ambiguous. If no ambiguity was found the court was unable to consider any other evidence of the settlor’s intent, and the beneficiaries were stuck with whatever the trust says on its face. In Florida, this changed when Florida adopted the Florida Trust code in 2007.
Florida’s Trust code is modeled on the Uniform Trust Code (UTC). The UTC deals with modifications in a number of sections that Florida has mostly adopted. For instance, UTC § 412 allows a court to modify or terminate a trust when the following circumstances occur:
- The trust’s purpose no longer exists, unanticipated circumstances have occurred.
- A modification or termination will further the purpose of the trust
- The trust’s existing terms would be impracticable, wasteful, or would impair the trust’s administration.
In Florida, the Florida Trust Code is still the controlling law when it comes to a Florida court’s ability to modify a trust. The Florida Trust code has many statutes that correlate directly to similar UTC provisions. Here are a few of the more commonly used Florida modification statutes.
Fla. Stat. § 736.04113
This statute allows a court to modify an irrevocable trust when modification is not inconsistent with the trust’s purpose. A trustee or qualified beneficiary may petition a court to modify a trust when circumstances have occurred that were not anticipated by the settlor. Under this law, a court may modify the trust or even change the terms of the trust distribution. Courts are also allowed to consider extrinsic evidence at its discretion. This means a party can present evidence of the settlor’s intent with other documents besides the trust.
A good example of when this statute might be used occurs is when a trust is created to support a family member who is not expected to survive. Another example might be a trust created for a child who has special needs and later recovers or a trust created for someone who is expected to be disabled, but is later denied for disability so they do not need the trust provisions. If the circumstances change, it may be possible to change the terms of the trust to deal with the new situation.
Fla. Stat. § 736.04114
This statute allows a court to modify an irrevocable trust with federal tax provisions by defining who the beneficiaries are and the amount of their respective shares. This Florida code also works directly with 736.0416, which allows a court to modify the terms of a trust that was created to achieve the settlor’s tax purposes. Therefore, when estate taxes change or other circumstances occur, a court is allowed to modify or terminate a trust created for tax purposes. This Florida law relates directly to UTC § 416.
Many estate-planning attorneys feel these types of modifications will become more common as the estate and gift tax exemptions continue to grow larger. Only a few years ago, the tax exemptions were much lower and trusts were often created to limit the tax burden on the estate. Now these trusts may actually save more money if they are modified under the existing tax laws. These statutes allow a court in Florida to modify the trusts that were created with this tax limiting purpose in mind.
Fla. Stat. § 736.04115
This statute allows a court to modify a trust when compliance with trust terms is not in the best interest of the beneficiaries. This statute also allows the court to weight extrinsic evidence relevant to the proposed modification. The extent a court will modify a trust for the beneficiaries in a manner that conforms as close as possible to the settlor’s intent. This statute will be used when a beneficiary wishes to modify or terminate a trust, even if that modification would directly conflict with the settlor’s intent.
A good example of when this statute has been used occurred in a case where the beneficiaries were in agreement to allow a corporate trustee to resign without liability. The trust contained a mandatory corporate-trustee clause, which would not allow the corporate trustee to resign without breaching his fiduciary duties to the trust. Looking at the facts of the case, the court felt the corporate trustee had substantially administered the trust and it would be in the best interest of the beneficiaries to modify this clause.
An irrevocable trust is a powerful tool in the estate-planning world, however unforeseen circumstances may require the trust to be modified or terminated in order to still be lucrative to the beneficiaries. Modifications have been known to save estates a fortune, and the Florida Trust codes have made it easier than ever to receive a judicial modification. For more information on how a modification can serve your estate planning needs, contact the Law Office of David Goldman PLLC.