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Modification Special Needs Trusts
[a] Revocable Trust vs. Irrevocable Trust
A SNT established by a third party for the benefit of a beneficiary with a
disability and funded with the grantor's assets (not the assets of the
beneficiary who has a disability) could certainly be created as a garden
variety, revocable inter vivos trust. Since the assets of the trust are not the
beneficiary's, the trust is not subject to any of the rules covering
self-settled SNTs, discussed below. If the trust is revocable it is, by
definition, modifiable and terminable at the whim of the grantor. Since
modifying or terminating revocable trusts is inherent in their structure, they
will not be discussed further here. However, it should be kept in mind that
such trusts frequently become irrevocable upon the death of the grantor and, at
that point, may become subject to the considerations discussed below.
[b] Irrevocable Trusts
SNTs are most commonly created as irrevocable trusts and therefore this
discussion will focus on the reasons and methods for modifying irrevocable
[c] When and Why
A properly drafted SNT will contain provisions permitting its modification
at any time and for any reason that is appropriate under the circumstances.
What those circumstances are will depend on the nature of the individual trust,
the primary beneficiary's condition, the trust's assets and any other factors
the drafter deems appropriate. On the other hand, many older SNTs and those
drafted by inexperienced draftspersons lack provisions permitting modification.
Unfortunately, it is the trusts lacking modification provisions that most
frequently are in need of modification in order to fix problems that have
arisen because of unanticipated situations....
Please click on the link at the top of the post to view or download the
extended excerpt as well as the Table of Contents for Fundamentals of Special
This free download is part of Fundamentals of Special Needs Trusts,
which places special needs trusts in the arsenal of tools available to an
attorney to help his senior clients and those who have disabilities. It helps
the practitioner to understand how she can draft a trust, using the person's
own funds or the funds of another, to provide goods and services for those
clients that will enhance their everyday existence.
Fundamentals of Special Needs Trusts provides practitioners
with analysis of the law, authoritative advice, practice notes, checklists, and
forms. It begins with a discussion of the history of special needs trusts,
discusses ethical issues, explains the various types of special needs trusts
and how to draft, fund, and administer those trusts, how and when to terminate
them, and the relevant tax considerations.
It is a reasonably priced desk manual that is available at the LexisNexis Store and is the product
of highly experienced practitioners.