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Modifying Irrevocable Trusts Using Nonjudicial Settlement Agreements

Structuring NJSA Wrappers, Relocating Trust Situs, Resolving Disputes, Remedying Trust Construction Issues

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Thursday, November 9, 2023

Recorded event now available

or call 1-800-926-7926

This CLE course will provide estate planners with a comprehensive and practical guide to structuring nonjudicial settlement agreements (NJSAs) as a tool for modifying irrevocable trusts in states that have adopted the Uniform Trust Code or have NJSA statutes. The panel will discuss what modifications these settlement agreements can and cannot implement and offer useful guidance to properly structure NJSA "wrapper" provisions that will withstand IRS scrutiny.

Description

A powerful tool for amending or repairing irrevocable trusts is the binding NJSA. Most irrevocable trusts do not provide for the amending of trust terms except in instances where modification is necessary to comply with the tax code or other specified laws. However, there are four methods for repairing or modifying irrevocable trusts, which most states recognize: decanting, modification by a trust protector, a binding NJSA by the parties to the trust, and a variation of the NJSA, which is obtaining court approval of the settlement agreement.

An NJSA is an agreement among "interested persons" to make alterations to an irrevocable trust. Interested persons are generally defined as any person whose consent would be required to achieve a binding settlement were the settlement to be approved by the court.

Depending on state law provisions, the trust terms that an NJSA may modify are limited only by the restriction that the modification may not violate any material purpose of the trust and would be approved by a court if reviewed.

While versatile and powerful tools for modifying irrevocable trusts, NJSAs also contain risks. Estate planning counsel should have a thorough understanding of critical drafting practices to avoid severe and costly consequences.

Listen as our experienced panel provides a comprehensive and practical guide to using NJSAs to modify irrevocable trusts, including strategic tips and drafting tools.

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Outline

  1. Amending an irrevocable trust
  2. Uniform Trust Code provisions
    1. Determination of "interested person"
    2. Prohibition against modifying "material provision" of trust
    3. Terms that binding NJSAs may modify
  3. Other NJSA statutory provisions and variances from UTC model
  4. Using an NJSA to relocate a trust situs
  5. Obtaining court approval of NJSAs
  6. Structuring NJSA "wrapper" provisions
  7. Determining whether an NJSA is permissible

Benefits

The panel will review these and other high priority issues:

  • Which trust provisions may NJSAs amend in states that have adopted the Uniform Trust Code?
  • What other states have statutes or trust code provisions allowing for NJSAs, and how do they differ from the UTC provisions?
  • How to structure an NJSA "wrapper"
  • What are the tax consequences of making trust changes through an NJSA?
  • What are the considerations for determining when it is desirable or necessary to have a court ratify the terms of an NJSA?
  • What other methods should counsel be aware of to modify irrevocable trusts?

Faculty

Kallabat, Mallory
Mallory A. Kallabat
Senior Attorney
Clark Hill

Ms. Kallabat provides personal legal services to individual and corporate clients in the areas of estate planning, tax...  |  Read More

Silverman, Louis
Louis A. Silverman
Attorney
Silverman Law Offices

Mr. Silverman has been practicing law for over 30 years. He is admitted to practice in the state courts of Arizona and...  |  Read More

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