As outlined in my previous blog post, an irrevocable trust is one that by definition and design cannot be amended, modified, changed or revoked. A settlor, one who creates or contributes property to a trust, may wish to make his or her trust irrevocable for any number of reasons. As time passes, however, the circumstances under which an irrevocable trust was necessary or preferable may no longer exist. To this end, the Code of Virginia sets forth several provisions by which an irrevocable trust may be modified or terminated.
Among those provisions is Virginia Code § 64.2-730, which provides that an irrevocable trust may be modified or terminated because of unanticipated circumstances or an inability to administer the trust effectively. Specifically, a court may modify the administrative or dispositive terms of a trust or a court may terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. In doing so, a Court will, to the extent practicable, modify a trust in accordance with the settlor’s probable intention. In addition, a court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust’s administration.
In either circumstance, the statute makes clear that a showing must be made to the Court and the burden of proof is upon the party moving for a modification or termination to prove that there were unanticipated circumstances or a frustration of the administration of the trust under its existing terms sufficient to warrant such modification or termination. If the moving party has requested termination of an irrevocable trust under Va. Code § 64.2-730 and meets his/her burden, the trustee will be directed to distribute the trust property in a manner consistent with the purposes of the trust.
If you believe that an irrevocable trust requires modification or termination because circumstances have changed or because its provisions no longer allow for effective administration, it is important to consult with an attorney who understands the requirements for modification and termination of irrevocable trusts.