Breaking a Trust in Iowa
A common question that I get asked is about "breaking a trust". By breaking a trust, someone typically means doing away with a trust for some reason or changing its terms. Is it hard to do? Can it be done? Yes, it certainly can be done. The difficulty of doing so depends on the circumstances.
Terminating or Modifying a Trust in Iowa
The general background is that a trust will run its course until its objectives are reached. However, there are situations which may be applicable that affect the trust. Under the Iowa Trust Code, which is still relatively new and untested in Iowa, there are several statutory options that are available for consideration.
Terminating a Small Trust in Iowa
If the amount of the trust is relatively low and incurring costs in its administration, it is possible to terminate the trust and distribute the assets to the beneficiaries, even if the trust terms provide for the trust to continue into the future. A court would need to approve such a termination after either the trustee or a beneficiary request the court to terminate the trust. Iowa Code sec. 633A.2205 (2007). Whatever "low" value means depends on the costs involved, the argument presented to the court and the court's opinion as to what is "low enough".
Modifying a Trust in Iowa
it is possible to change an irrevocable trust. If the settlor (the person who created the trust) is still alive, so long as they consent and all the beneficiaries consent, a trust could be modified or even terminated. Court involvement is not necessary. Iowa Code 633A.2202. If the settlor is dead, there is a different procedure involved. If ALL the beneficiaries are in agreement and it isn't necessary for the trust to carry on with the same terms, a court can permit the trust to be modified or even terminated. The difficult component is getting the consent of each beneficiary. The Iowa Trust Code does provide some relief when dealing with minor beneficiaries. Iowa Code 633A.2203.
Replacing the Trustee of an Iowa Trust
This provision has some unresolved questions that may need to be clarified in the future through some legislative changes. Historically, it was difficult to remove a trustee from a trust. However, the relatively new (& untested) Iowa Trust code does provide some "gray area" that may be used to change the trustee. There is also the possibility that a trust could be amended by insertion of a provision in a trust permitting a procedure to remove a trustee. At least one court in Iowa has permitted this change.
I just read this post and was wondering.... How do you put a value on material heirlooms that were not designated in the will? Ex: Grandma has passed away after living in Great Grandparents home... all contents from inside the home have been left to her and so now have been designated to her only heir (daughter) BUT Grandma still had one surviving Brother and now he would like certain items that remained in the house. It has been 15 years since the death and reading of the Great Granparents will and the Brother has never requested anything nor shown an interest in the home. He does, along with Grandma's daughter have an interest in the sale of the property but not it's content. Iowa states that attorneys receive 2% of the assests but how do you value heirlooms, whether they be furniture, silver, photo's etc.. The original will from the Grandparents itemized farm equipment but lump summed the homes content... Obviously with the addition of the Grandmothers items the items exceed this amount but her will does not give a value nor an itemization. Does there now need to be an accounting or does just the original $2,500 need to be met? The house is full! Some good, some bad but there are adult granchildren plus the daughter that would like certain things. Because the daughter now owns the content can the daughter now "pass" down these things,which means they are given freely or does each person have to buy these things from the "estate"?
Heirlooms typically have little "financial" value. The rule of thumb is what would you get for that item at a garage sale? For many items, nothing.
If I understand your question, it may be difficult to divide up the contents of the house at this time. It can be difficult to determine which was her's. Plus, the passage of time is not a good factor in the law. There isn't a law that says "you snooze you lose", but it kind the same impact.