What is Required for a Nonjudicial Trust Settlement in Massachusetts?
I have just read all your posts regarding irrevocable trusts. They were very significantly informative! Thank you. I am one of two co-trustees of an irrevocable trust (in Massachusetts.) The trust was set up by my sister (November 2021) to avoid probate and establish a “life estate” for her principal residence. Both trustees and the grantor agree to explore a “nonjudicial settlement” to alter the trust. After reading your post on the three solutions to change a trust, what specific steps would you recommend to accomplish this? We have no idea where to begin to compose the settlement agreement.
The article discussed reformation, nonjudicial settlement and decanting. Reformation requires going to court. Decanting to a new trust does not, but is in a bit of a gray area in Massachusetts because it’s been authorized by court decisions but there are no statutes saying exactly what steps to follow so it can’t be challenged.
The relevant statute permitting a nonjudicial settlement regarding a trust is Massachusetts G.L. Ch. 203E, sec. 111, which you can read here: https://malegislature.gov/Laws/GeneralLaws/PartII/TitleII/Chapter203E/Article1/Section111.
It permits revisions of the trust for the following limited purposes as long long as all the “interested persons” agree:
(1) the interpretation or construction of the terms of a trust;
(2) the approval of a trustee’s report or accounting;
(3) direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
(4) the resignation or appointment of a trustee and the determination of a trustee’s compensation;
(5) transfer of a trust’s principal place of administration; and
(6) liability of a trustee for an action relating to the trust.
So, the first question is whether this covers the goal you are seeking to achieve. If so, you can write up an agreement signed by the “interested persons” to that effect. The “interested persons” are defined by reference to Massachusetts G.L. Ch. 203E, sec. 411, which requires that the grantor (if available) and all beneficiaries consent to a judicial modification or termination of a trust. A “beneficiary” is defined at Massachusetts G.L. Ch. 203E, sec. 103, as “a person who has a present or future beneficial interest in a trust, vested or contingent.”
So, your sister and all potential current and future beneficiaries must sign off on the nonjudicial settlement agreement. This might be difficult with respect to contingent beneficiaries. For instance, a person’s children may only be beneficiaries if their parent is not alive when the trust terminates. But they would still have to sign off on the settlement. If they are not available or if the purposes listed above do not encompass what you have in mind, you may need to look at another alternative, either reformation or possibly decanting.