Pennsylvania Trustee Mistake # 7 - Failure To Properly Reform, Amend, or Terminate

Pennsylvania Trustee Mistake Part 7

Failure To Properly Reform, Amend, or Terminate When Needed

Under prior law in Pennsylvania, non-charitable irrevocable trusts, like a small family trust, may be modified or terminated for any reason as long as the settlor and all beneficiaries agree. Under the Uniform Trust Act, that process of modifying or terminating a trust privately and without court approval may be more complicated. As a trustee the more information you give everyone and the more you keep them involved the more likely whatever changes you see fit will be welcomed with consent by either the trust beneficiaries or the court.

In some cases when the settlor is not able to give consent, he or she has passed away,or beneficiaries cannot be determined (like unborn grandchildren) then the court will have to approve with everyone's consent. Be aware the court will also approve without everyone's consent if the non-agreeing parties interests are adequately protected despite the proposed change. A trust may also be terminated if the trust does not achieve any material purpose.

In short, if a trust needs to be modified or terminated, you need to make sure the settlor and all the beneficiaries agree and if they do not you have to get court approval to terminate without everyone's consent. Consider having a consultation with legal counsel to make sure that you get off on the right foot and start following the trustee rules from the beginning of the trust administration. The better relationship you have formed with the beneficiaries, by doing things like keeping them up to date on the trusts assets, the better chance you have to get everyone's consent when it comes time for you to change or terminate the trust document.

See all ten of our articles on How To Avoid The Most Common Mistakes Trustees Make:

Avoiding Trustee Mistakes No. 1: Trustees Failing To Understand The Trust Language

Avoiding Trustee Mistakes No. 2: Trustees In Trouble Making Early Distributions

Avoiding Trustee Mistakes No. 3: Trustees Failing To Follow The Prudent Investor Rule

Avoiding Trustee Mistakes No. 4: Trustees Failing To Follow The Uniform Trust Act

Avoiding Trustee Mistakes No. 5: Trustees Failing To Follow The Principle And Income Act

Avoiding Trustee Mistakes No. 6: Trustees Failing To Communicate Properly

Avoiding Trustee Mistakes No. 7: Failing To Properly Reform, Amend, Or Terminate

Avoiding Trustee Mistakes No. 8: Failing To File Tax Returns Or To Seek Professional Assistance

Avoiding Trustee Mistakes No. 9: Failing To Understand The Role Of Multiple Trustees

Avoiding Trustee Mistakes No. 10: Trustees Failing To Do The Job

David M. Frees III
[email protected]
610-933-8069
Representing trustees and executors