Trusts are an important tool in estate planning. While the concept of a trust has existed since ancient times, the governance of these agreements is ever-changing. Establishing an irrevocable trust in Kentucky can help you manage and distribute your property and wealth in a way that reduces tax burdens and assures the security of the assets you have worked hard to accumulate over your lifetime.
Why Create an Irrevocable Trust in Kentucky?
An irrevocable trust legally removes your property from your ownership and places it in the custody of a trustee, to be distributed as designated in the terms of the trust agreement to the beneficiaries you choose. While this effectively limits a grantor's control over the property in the trust, it also reduces that person's assets, which can be beneficial for tax purposes, long-term care planning, and general asset protection.
While a revocable trust prevents property from being subject to the probate process, it does not provide the same benefits as an irrevocable trust, because the assets still technically belong to you and the revocable trust agreement can be modified as long as you are living.
Irrevocable Trusts under the Kentucky Uniform Trust Code
Many states regulate trusts based on model rules established by the Uniform Trust Code, and Kentucky is one of those states. The Kentucky Uniform Trust Code is outlined in the Kentucky Revised Statutes (KRS) §33.386B; these laws regulate the creation and administration of trusts of all kinds.
The Kentucky Uniform Trust Code was implemented in 2014 and expanded upon provisions already in effect in state law related to the governance of trusts. Among other implications, the Kentucky Uniform Trust Code provides greater clarification of definitions and procedures related to the administration of an irrevocable trust in Kentucky.
In addition, the provisions of the Kentucky Uniform Trust Code provide guidance on how-and under what circumstances-an irrevocable trust can be altered by the various interested parties. A Kentucky irrevocable trust lawyer can assist you in determining how these laws apply to your situation to ensure that any actions related to your trust are legal, ethical, and in the best interest of your family and estate.
Changing an Irrevocable Trust in Kentucky by Nonjudicial Agreement
In a noncharitable irrevocable trust, modifications can be made to the trust with the signed agreement of the grantor and beneficiaries. Any nonjudicial agreements changing an irrevocable trust must include details of how the corpus-the property held in the trust-will be distributed under the new arrangements or, when applicable, upon the termination of the trust.
Changing an Irrevocable Trust in Kentucky by Court Order
When changing an irrevocable trust by nonjudicial agreement is not possible, there are additional avenues available to amend the requirements or details of a trust. Some of the circumstances under which a trust can be modified include the following:
- All beneficiaries of the trust agree to the requested changes, and those changes do not impact the material purpose of the trust
- Unanticipated circumstances limit the trustee's ability to administer the trust as directed by the grantor
- The administration of the trust is proven to have become wasteful or impractical
- The value of a trust has diminished to a point at which administration costs are no longer justified
- A mistake of fact or law has created a known error in the trust
- The grantor's tax objectives cannot be met without modification of the trust
When the terms of a trust can remain intact, it can also be an option to merge or separate trusts for more efficient or reasonable administration. All of these scenarios are highly personalized and based on the specific details of the trust in question, as well as the circumstances of the grantor and beneficiaries and the current provisions of the Kentucky Uniform Trust Code.
Contact a Kentucky Irrevocable Trust Lawyer for Guidance
Navigating the Kentucky Uniform Trust Code and other applicable laws, while also considering tax implications and potential financial penalties, can be an onerous task. A Kentucky irrevocable trust lawyer is an excellent resource for sorting out which possible routes are available to you if you are considering changing an irrevocable trust.
If you have questions about creating or modifying an irrevocable trust in Kentucky, Anna M. Price of Jenkins Fenstermaker, PLLC can help. Anna is a compassionate and experienced estate planning attorney who will identify the best options for your specific case. Contact her today by completing her online contact form or calling (866) 617-4736.