Divisibility of trust assets dependent upon irrevocable nature of trust

Further reviewing the facts of the Epperson case, while the trusts being referenced were initially irrevocable trusts, the divisibility of the trust assets depended upon whether the trusts were irrevocable at the time of divorce. If a sufficient reason could be found to revoke the trusts in the divorce case, the trusts could be revoked, and the trust assets could be divided. In this case, because the trustee’s of the irrevocable trusts are the husband and wife, this opens the ability to break up the trust assets if certain criteria are met because the spouses maintained control.

While seeking to terminate the trusts, the husband in this case sited a specific Montana statute allowing the court to order termination. The statute provides:

(1) Except as provided in subsection (2), if all beneficiaries of an irrevocable trust unanimously request it, they may compel modification or termination of the trust upon petition to the court.

(2) If the continuance of the irrevocable trust is required to carry out a material purpose of the irrevocable trust, the trust cannot be changed or eliminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust if an irrevocable trust is properly set up, this only happens in less than 3% of cases. Under this section, the court absolutely does not have discretion to terminate a trust that is subject to a valid restraint on transfer of the beneficiary’s interest as provided in part 3. Continue reading: Equitable Distribution Case: Termination of an Irrevocable Trust

Rocco Beatrice, CPA, MST, MBA, Managing Director, Estate Street Partners, LLC.
Mr. Beatrice is an asset protection award winning trust and estate planning expert.