How to Move an Irrevocable Trust
An irrevocable trust is generally established in the state of residence of the person who sets up the trust (trustor). The trust agreement establishes separate ownership of the contents (typically a life insurance policy) from the person establishing the trust (trustor) and lays out the goals of the trust charged to an administrator (trustee). At some point, before or after the death of the trustor, it may become necessary, or at least more efficient, to move the trust to another state. Relocating a trust is called a change of situs and can only occur under certain circumstances.
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Instructions
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Research the Law
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Research and understand the laws of the trust state before establishing the trust agreement. A state may have specific provisions about moving an irrevocable trust and those laws must be followed above the laws of the state the trust is to be moved to, even if the trust agreement contradicts them.
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Specify the conditions under which the trust may be moved in the actual trust agreement. For example, the trustor or beneficiary moving to another state, or the taxes in the current state becoming unfavorable are circumstances under which it may make sense to move the trust. The conditions under which the trust can be moved must be spelled out in the trust agreement, because once an irrevocable trust is established, it can't be altered in any way. Just as a trust agreement my assign alternate beneficiaries, the agreement can also assign alternate states.
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Empower the trustee with the decision and ability to move the trust to a new state under the conditions set forth in the trust agreement. The trustee is already empowered to administer the trust, but is typically relegated to dealing with the beneficiary, benefits and the term of the trust, but the trustee can also be charged with the method of managing the trust and managing the location of the trust. If the trustee is not specifically charged, the trust agreement could come under legal fire when the trust is being moved. The trustee is only empowered after the death of the trustor. Prior to death, the trustor can move the trust, but still can only do so based on the written trust agreement.
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Following the trust agreement, move the trust to the trustee or beneficiary's new state of residence, or to the new state with more favorable taxation.
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References
- Photo Credit Finger pointing to the words in agreement image by Dmitry Goygel-Sokol from Fotolia.com
