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Adapting trusts to changing circumstances: Understanding trust modification in Colorado

Trusts serve as powerful tools for estate planning, allowing their creators to protect and distribute their assets according to their wishes. Life is ever-changing and the terms initially outlined in a trust may not always align with a beneficiary’s current needs. In Colorado, trust modification allows an irrevocable trust to be modified in certain circumstances. 

What is trust modification?

Trust modification refers to the process of making changes to the terms or provisions of an irrevocable trust. An irrevocable trust typically means the terms cannot be altered once established. However, Colorado law provides mechanisms for modifying trusts under some circumstances. 

What are the grounds for trust modification?

Many situations allow for trust modification, including:

  • Changing beneficiary needs. A beneficiary’s needs may be different than the creator of the trust initially envisioned. Sometimes this is due to the beneficiary being a special needs beneficiary, needing to qualify for public benefits or needing to convert the trust to a unitrust. Each of these situations could be grounds to seek modification of a trust.  
  • Changing financial situations. Minor fluctuations in wealth should not trigger a trust modification, but dramatic increases or decreases in wealth may warrant a trust modification.  For example, Colorado law considers a trust to be uneconomical to administer if its value is less than $100,000. 
  • Changes in trust and tax law. Tax laws are always evolving, so what was once an effective strategy to protect and maximize your assets may become outdated or less advantageous over time. If the original terms of the trust are impractical, then a modification may be warranted. 

What is the process for modifying a trust? 

An experienced Colorado trust and estate lawyer can help you analyze the paths for modifying a trust. One path involves the Court’s review and approval of the modification.  Another path involves a nonjudicial settlement agreement signed by all the qualified beneficiaries of the trust. The attorneys at Brown Law Firm can review and advise you regarding the modification of an irrevocable trust. Contact us at 303-339-3750