Adapting Your Irrevocable Trust to Changing Laws and Life Events
A properly crafted trust is an important estate planning tool. It protects assets during the probate process and provides for loved ones. But what happens when an irrevocable trust no longer serves the way it was intended. Many clients have old irrevocable trusts. Most clients seem to believe that once done, there is nothing left to do. Because nothing needs to be done, clients often see no need to review the trust's relevance. (We recommend a review every 4 years).
What is the difference between revocable and irrevocable trust?
Revocable – most trusts are established during the lifetime of the grantor of the trust, who is often the initial trustee or beneficiary. This means that the grantor of the trust may revoke the trust during his or her lifetime. Generally, specific provisions for amending the trust to adjust to the needs of the grantor or beneficiaries.
Irrevocable -an irrevocable trust may not be reformed or amended by anyone to include the grantor, at the time of execution. Sometimes these trusts are often created during the lifetime of the grantor, but more often irrevocable trusts are created as testamentary under a decedent' s Will or because a revocable trust automatically becomes irrevocable upon the death of the grantor. Therefore, whatever conditions were established when the trust becomes irrevocable stays that way.
Estate planning has undergone significant changes since the passing of the Big Beautiful Bill Act in 2025, which permanently raised the federal estate and gift tax exemption to $15 million per person on January 1, 2026, with annual inflation adjustments. For most people avoiding estate tax is no longer relevant, but saving state, or inheritance taxes, income taxes, or protecting assets still exists.
Older trusts cannot predict major tax changes. Here are a few reasons a Trust would require reformation.
- A grantor has a condition within the document which they no longer believe is appropriate.
- A beneficiary experiences a major health or financial crisis.
- Tax law has changed so a trust's provisions are obsolete.
- An Irrevocable trust does not provide for a successor trustee and there is no way to appoint one.
- All beneficiaries agree that the trust is not functioning as it was originally intended.
- Older trusts, those designed during a lower exemption time, can impose unnecessary tax, and administrative burdens
- State fiduciary income taxation has made it necessary for adjustment; many states have improved trust governing laws
On January 1, 2015, the Maryland Uniform Trust Act took effect which allowed for an irrevocable trust to be reformed or modified with the consent of the trust beneficiaries.
Get in touch with our team today or call (301) 468-3220 to discuss updating and reforming your trust.