Does Oregon have a termination law for an irrevocable trust? ...

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Does Oregon have a termination law for an irrevocable trust?

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DakotaLegal's picture

Yes, surprisingly, there are

Yes, surprisingly, there are some situations where an irrevocable trust will need to be changed or even terminated. Let’s take a look at some of the most usual situations…youo may want to begin by looking at the laws themselves: http://www.leg.state.or.us/ors/130.html .

The most common situations where a trust can be terminated in Oregon is when ALL the parties with an interest in the Trust agree to the termination. The Oregon Bar also has workshops and publications, describing trusts and whether they are truly irrevocable or not. http://www.osbar.org/!newsletters/estateplanning_july06.pdf

In Oregon, there have even been some cases where (despite disagreement between the beneficiaries) a court still allowed termination. One of the most important of these cases came in 2006. That’s In re Dobyns, 205 Or. App. 183, 134 P.3d 983 (2006). In this case, the trust had been created to take advantage of some tax codes, but the lawyer’s advice on the tax issue was wrong. This went to the very purpose of having the trust. Instead of basing a decision on the Trust law, the court relied on a prior Oregon statute and the idea of equity…or what the law deems as essential fairness. This raised a very important point that is one of the best ways to either keep or terminate even an irrevocable trust: “Was there such a serious mistake that the irrevocable trust was grossly unfair?”
Another less common way to rescind an irrevocable trust is to prove fraud or undue influence. You can check out these tests through reading a case such as Egr v. Egr, 170 Or. 1, 131 P.2d 198 (1942) (this case says that a trust created by undue influence should be invalid) and Restatement Second of Trusts § 333 (1959) saying that if a trust was made without what’s called “consideration” it may not be valid. The use of consideration is a contract idea, and usually applies when the trust involves some bargain between non-family members. You can also see undue influence of someone with Alzheimers: http://caselaw.findlaw.com/or-court-of-appeals/1023463.html .

Hopefully, by now you can see that the reason for creating the trust, your interest and actions in the trust, and whether any type of mistake were involved can cause the termination of a trust. But there’s also a good possibility that changing the irrevocable trust might be the best answer. Here’s a case you may want to read to understand how changing one part of a trust may save the trust (in this case, changing a trustee): http://caselaw.findlaw.com/or-court-of-appeals/1320638.html .

One final thing to keep in mind, now that we’ve talked about the law on the books, there are also court powers (such as in the Dobyn’s case) under the common law. This may mean you also have rights to check on whether there are some exceptions to the law, meaning a supposedly irrevocable trust cannot stand the way it is. In most ways, though, Oregon courts will try to protect an irrevocable trust. The most common situations where a court will not protect such a trust from revocation is where there is a special need, or the trustees and trustors are the same person, and enforcing the trust is clearly going to hurt them.

Though you did not mention whether this applies or not, there are special protections for those with disabilities, for example. These protections can apply, whether the trust was created by or for the person with a disability. http://www.droregon.org/need-help . There is also specialized P&A help just for guardianship issues, which are often important in modifying an “irrevocable” trust. http://www.droregon.org/need-help/guardianship . In the same way, the Oregon Attorney general has special programs to protect seniors from financial abuse. http://cms.oregon.gov/dhs/spd/pubs/finabuse_eng.pdf

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DakotaLegal's picture

Yes, surprisingly, there are

Yes, surprisingly, there are some situations where an irrevocable trust will need to be changed or even terminated. Let’s take a look at some of the most usual situations…youo may want to begin by looking at the laws themselves: http://www.leg.state.or.us/ors/130.html .

The most common situations where a trust can be terminated in Oregon is when ALL the parties with an interest in the Trust agree to the termination. The Oregon Bar also has workshops and publications, describing trusts and whether they are truly irrevocable or not. http://www.osbar.org/!newsletters/estateplanning_july06.pdf

In Oregon, there have even been some cases where (despite disagreement between the beneficiaries) a court still allowed termination. One of the most important of these cases came in 2006. That’s In re Dobyns, 205 Or. App. 183, 134 P.3d 983 (2006). In this case, the trust had been created to take advantage of some tax codes, but the lawyer’s advice on the tax issue was wrong. This went to the very purpose of having the trust. Instead of basing a decision on the Trust law, the court relied on a prior Oregon statute and the idea of equity…or what the law deems as essential fairness. This raised a very important point that is one of the best ways to either keep or terminate even an irrevocable trust: “Was there such a serious mistake that the irrevocable trust was grossly unfair?”
Another less common way to rescind an irrevocable trust is to prove fraud or undue influence. You can check out these tests through reading a case such as Egr v. Egr, 170 Or. 1, 131 P.2d 198 (1942) (this case says that a trust created by undue influence should be invalid) and Restatement Second of Trusts § 333 (1959) saying that if a trust was made without what’s called “consideration” it may not be valid. The use of consideration is a contract idea, and usually applies when the trust involves some bargain between non-family members. You can also see undue influence of someone with Alzheimers: http://caselaw.findlaw.com/or-court-of-appeals/1023463.html .

Hopefully, by now you can see that the reason for creating the trust, your interest and actions in the trust, and whether any type of mistake were involved can cause the termination of a trust. But there’s also a good possibility that changing the irrevocable trust might be the best answer. Here’s a case you may want to read to understand how changing one part of a trust may save the trust (in this case, changing a trustee): http://caselaw.findlaw.com/or-court-of-appeals/1320638.html .

One final thing to keep in mind, now that we’ve talked about the law on the books, there are also court powers (such as in the Dobyn’s case) under the common law. This may mean you also have rights to check on whether there are some exceptions to the law, meaning a supposedly irrevocable trust cannot stand the way it is. In most ways, though, Oregon courts will try to protect an irrevocable trust. The most common situations where a court will not protect such a trust from revocation is where there is a special need, or the trustees and trustors are the same person, and enforcing the trust is clearly going to hurt them.

Though you did not mention whether this applies or not, there are special protections for those with disabilities, for example. These protections can apply, whether the trust was created by or for the person with a disability. http://www.droregon.org/need-help . There is also specialized P&A help just for guardianship issues, which are often important in modifying an “irrevocable” trust. http://www.droregon.org/need-help/guardianship . In the same way, the Oregon Attorney general has special programs to protect seniors from financial abuse. http://cms.oregon.gov/dhs/spd/pubs/finabuse_eng.pdf