Modification and Termination by Consent

An irrevocable trust can be changed or ended if the person who created it (the settlor) and all beneficiaries agree. If the settlor is no longer available, the beneficiaries can modify the trust on their own as long as it doesn't undermine the trust's main goals, and they can also request changes if circumstances have significantly changed.

A settlor creates an irrevocable trust for the benefit of three beneficiaries, specifying that the funds are to be used for education. After several years, the beneficiaries all agree to modify the trust to allow for the funds to be used for starting a business instead, as they believe this will better serve their needs. The modification is valid because all beneficiaries consented and the original purpose is not materially impaired.

Consent is key: all beneficiaries must agree to modify an irrevocable trust!

Exams may present scenarios where only some beneficiaries consent to a modification, leading students to mistakenly believe the modification is valid. It's crucial to remember that unanimous consent is required unless a material purpose is not impaired.

Questions often involve fact patterns where beneficiaries disagree on modifications, testing the student's understanding of consent requirements and the concept of material purpose.