Trust law has traditionally prohibited changes that frustrate the material purpose of a grantor's trust. However, the legal trend is to allow modifications in the interests of beneficiaries, especially when a grantor's purpose is ambiguous. To protect your trust, be sure to make your intentions clear.

Courts now more readily modify trusts, but still give deference to the grantor's intent. Thus, it's vital that grantors clearly state what they want. Otherwise, intent may be interpreted subjectively and information other than trust language considered. Several options can be used to spell out intent.

1

Statement of Intent (SOI): A Formal Declaration of Purpose

An SOI is a brief statement of purpose that's put in the trust document. It's as binding as other trust language, and it carries great weight in guiding trust administration and investment.

2

Letter of Wishes (LOW): A Personal Letter From Grantor to Trustee

An LOW gives detailed insight into how the grantor wanted the trust to be administered. It can be written or amended at anytime. Although not legally binding, in some states it may be treated as evidence of grantor intent.

3

Trust Protector: An Individual Who Safeguards the Trust

A trust protector is named by the grantor and is legally responsible for ensuring a trust is managed as intended. In a dispute, the protector may determine what the grantor might have wanted.

“Modern statutes are loosening the grip on a grantor's dead-hand control and taking into account the best interests of beneficiaries...”
It's important to clearly state a grantor's intent in a long-term trust
Legal trends are allowing trusts to last longer

If your trust lasts well past your lifetime, you need to make your wishes clear to trustees and beneficiaries you may never meet.

Tax changes are creating larger trusts

Increased exemptions and lower rates for gift, estate and other taxes are allowing bigger trusts to be created. That makes stating your intent more important.

Courts are making it easier to modify trusts

Many modern trust statutes allow trustees and beneficiaries greater freedom to change trust terms. To keep a trust true to your goals, make your intentions clear.

  • The information provided is for illustrative/educational purposes only. All investment strategies referenced in this material come with investment risks, including loss of value and/or loss of anticipated income. Past performance does not guarantee future results. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.