Wednesday, January 31, 2018
Article on Life is Change: Using Powers of Amendment in a Non-Charitable Trust--Rules and Tax Implications
Joel Nitikman recently posted an Article entitled, Life is Change: Using Powers of Amendment in a Non-Charitable Trust--Rules and Tax Implications, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:
A trust is an equitable obligation, owed by the trustee to the beneficiary in respect of property given by either the trustee in her personal capacity or a third-party settlor to the trustee, to be held on specified terms. Generally speaking, the trust's terms may not be amended. There are exceptions: a trust may be amended under the rule in “Saunders v. Vautier”, a court's salvage, or emergency powers.
In the case of a trust that contains an amending power, the conditions under which the power may be exercised and the rules governing its interpretation are subject to some debate. This article explores the law relating to the interpretation and application of amending powers and the potential income tax consequences of amending a trust.
In general, no rules limit the scope of an amending power: its scope and the manner in which it is exercised are based purely on its terms, interpreted in the light of their text, their context, and the factual matrix. Moreover, the use of an amending power should not result in the trust or a beneficiary being viewed as having disposed of any property for tax purposes.