I often meet with clients who have established an irrevocable trust or are beneficiaries of an irrevocable trust established by a deceased family member. Usually, these clients believe that the terms governing these trusts cannot be changed. Irrevocable trusts, however, often become inappropriate, either because of changes in the law, changes in trustees, family dynamics or a variety of other reasons. Trusts may become inappropriate either during the grantor's lifetime or many years after the grantor's death.

Fortunately, even though a trust may state that it is irrevocable, there are several options available under the law to modify or terminate irrevocable trusts, including in Missouri where I practice. These options are frequently used by grantors of irrevocable trusts, trustees and/or beneficiaries. The following are some examples of situations in which it may be advantageous to utilize these options to modify or terminate irrevocable trusts:

• Twenty years ago, Grantor established an irrevocable trust to hold a life insurance policy to exclude the life insurance proceeds from the Grantor's gross estate for federal estate tax purposes. Since the trust was established, the applicable exclusion amount under the federal estate tax law has increased dramatically. The Grantor no longer has estate tax concerns, and no longer sees a reason to have the irrevocable trust in place. 
• Grantor established an irrevocable trust for the benefit of her minor grandchild. The grandchild is now an adult and has been diagnosed with a chronic illness that may force the grandchild to apply for government benefits. Since Grantor did not know of the disability when the trust was established, it was not structured as a special needs trusts that would exclude the trust assets from the grandchild's resources for purposes of qualifying for government benefits.
• After Grantor's death, an irrevocable trust is funded for the benefit of Grantor's children and grandchildren. One of the children's advisors discovers an ambiguity in the trust document caused by a mistake made by the drafting attorney. As a result, there is confusion (and potential litigation) regarding the trustee's discretion in making distributions.

Although there are many opportunities for modifying or terminating irrevocable trusts, applicable law also imposes many requirements that must be carefully analyzed. Under Missouri law, depending on the situation, irrevocable trusts may be modified or terminated by agreement among the parties (e.g., the trustee and the beneficiaries) or by court order. Usually, all the parties will need to provide affirmative consent to the desired modification or termination. The parties may also have to show that the desired modification or termination is not prohibited by the grantor's intent as expressed in the document. The parties may be forced to go to court because the requirements for modifying or terminating an irrevocable trust by agreement cannot be met. These requirements may vary dramatically from state to state. 

Thus, given these options for modifying or terminating irrevocable trusts, an irrevocable trust is not necessarily irrevocable. Given the right circumstances, irrevocable trusts that are no longer appropriate (or never were appropriate) can be modified to provide greater benefits to the beneficiaries, provide flexibility to the trustees in administering the trust and better carry out the grantor's intent in establishing the trust, or even terminated if the trust no longer serves any practical purpose.