Altering THE Terms OF A Trust PDF

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New York Trust and Estates EPTL Lecture...

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Trust and Estates Notes Spring 2020 ALTERING THE TERMS OF A TRUST B/C OF UNANTICIPATED CIRCUMSTANCES Distributive Deviations ▪ When income is no longer enough to support income beneficiary ! change the actual dollar amount income beneficiary will receive o Petition of Wolcott: Income in trust to W for life, but she became ill and needed for than the income from the trust to maintain herself ! since kids consented and intention of H was to support W ! ct allowed for invasion of principle. Administrative Deviations ▪ When the administration of the trust as provided is wasteful or no longer logical, the court can allow administrative deviations o Matter of Pulitzer: Trust was funded with shares of a newspaper stock, which G directed to NEVER sell, but the stock fell very low and the beneficiaries wanted to sell it to avoid the trust going bankrupt ! ct allowed sale of the stock , beneficiaries would be hurt otherwise. Trust Decanting ▪ Used to describe the distribution of property from one trust to another ▪ Even if the trustee doesn’t have absolute discretion to take the principle out of the trust, he can still create a new trust out of it, but under certain limits o NY has a specific statute that allows this – empowering a trustee to pour the assets of an irrevocable trust into another trust. New trust needs to follow the same provisions as the old trust. INVASION OF PRINCIPLE A grantor can specify that a trustee can invade the principle of the trust. If the instrument is silent, go to ! EPTL 7-1.6. Application of principle to income beneficiary • Effective 6/1/1966.

• (a) PRE 1966 TRUSTS: When court can allow principle to be invaded for a beneficiary whose edu/support is not being provided for o Must have hearing to determine if invasion is necessary to satisfy the original purpose of the creator ▪ If court determines that G’s purpose cannot be carried out the way it is AND beneficiary has an indefeasible interest in principle ! court will allow invasion without consent • Will have interest in principle if it says something like at a certain age you can get it. So you have income interest then later allowed to invade principal ▪ If court determines that G’s purpose cannot be carried out the way it is AND beneficiary does not have an indefeasible interest in principle ! court will ONLY allow invasion with written consent of beneficiaries, acknowledged in the manner required for real property • (b) POST 1966 TRUSTS: o NO consent ever needed from beneficiaries o Must have hearing to determine if invasion is necessary to satisfy the original purpose of the creator o Court will allow invasion if it determines that G’s purpose cannot be carried out the way it is, (REGARDLESS of whether beneficiary has an indefeasible interest in principle), BUT notice must be given to those beneficially interested • (c) Offsets what is given under 7-1.6. In the event that an income beneficiary to whom an allowance is made, as provided in this section, is or becomes entitled to a share of the principle, such allowance, without interest thereon, shall be a charge upon such share. • (d) If this section would reduce or eliminate a charitable trust ! it should not be applied o Remember that there is an unlimited charitable deduction. So if invasion would lose you a charitable deduction, not applied. • (e) A supplemental needs trust that conforms to 7-1.12 shall be construed in accordance with the provisions that apply to such trust

o 7-1.12(b)(2) ! 7-1.6 shall not apply to the extent that it will reduce or eliminate the beneficiary’s entitlement to gov benefits or assistance...