Set in Stone? Three Ways an Irrevocable Trust Can Change in Virginia

The word “irrevocable” sounds final, and that is often why people hesitate to create this kind of trust. Signing documents that can never be touched again feels risky when tax laws shift, families grow, and a beneficiary’s needs change.

Here is the myth worth busting: in Virginia, an irrevocable trust is far less rigid than its name suggests. The settlor generally cannot simply tear it up, but the law offers structured ways to adjust a trust that no longer fits. Three of the most useful are decanting, trust protectors, and nonjudicial settlement agreements.

Decanting: Pouring the Trust Into a New Container

The term comes from wine. Just as you might pour wine from a bottle into a decanter, a trustee can move assets from an existing trust into a new trust with updated terms.

Virginia adopted the Uniform Trust Decanting Act, found at Va. Code § 64.2-779.1 and the sections that follow. Under Va. Code § 64.2-779.5, a trustee with decanting authority can often act without court approval or beneficiary consent, but must give written notice at least 60 days in advance to the settlor (if living), qualified beneficiaries, and certain other interested parties. That notice must describe how the power will be used and include copies of both the old and new trust instruments.

How much the trustee can change depends largely on the distribution discretion the original trust provides. Broad discretion allows bigger changes, while limited discretion usually means more modest ones.

Trust Protectors: Building Flexibility In From Day One

Decanting fixes problems after they appear. A trust protector can prevent them from becoming problems at all.

A trust protector is a person given specific powers in the trust document itself. For trusts administered in Virginia and created or modified on or after July 1, 2020, many of these roles are governed by Virginia’s Uniform Directed Trust Act, which uses the term “trust director”; older trusts follow different rules. Depending on how the trust is drafted, a protector might be authorized to:

• Remove and replace a trustee who is not performing well (a power that comes from the trust document itself, not the Directed Trust Act)
• Change the trust’s governing law or principal place of administration
• Adjust administrative terms to respond to new tax rules
• Direct or approve certain investment or distribution decisions

A protector only has the powers the trust grants, so these provisions deserve careful thought at the drafting stage.

Nonjudicial Settlement Agreements: Solving It at the Kitchen Table

Sometimes everyone involved simply agrees that a change makes sense. Under Va. Code § 64.2-709, interested persons may enter into a binding agreement on any matter involving a trust without going to court. These agreements can address issues such as interpreting unclear trust language, approving a trustee’s accounting, appointing or replacing a trustee, or moving the trust’s administration.

There is an important limit. The agreement is only valid if it does not violate a material purpose of the trust and includes terms a court could properly approve. In other words, the parties cannot agree their way around the core reason the trust exists.

Flexibility Starts With the Right Plan

An irrevocable trust can serve your family well for decades when it is drafted with change in mind. Whether your existing trust no longer fits or you want room to adapt in a new one, our Virginia Beach irrevocable trust attorneys can walk you through the options. Reach out to The Law Office of Angela N. Manz, and we will help you find out how much flexibility your plan really has.

Source:

law.lis.virginia.gov/vacode/title64.2/chapter7/section64.2-779.5/