This blog provides a summary of New Jersey law addressing when an irrevocable trust can be revoked.- This blog discusses whether the use of the terms “heirs,” “heirs at law,” or “next of kin” creates a residual beneficiary of the trust.
Discussion of This Blog Post
Let’s start with a quick update on New Jersey trust law. In this blog, I’ll discuss (1) when an “irrevocable” trust can be revoked, (2) whether the terms “heir,” “heir at law,” “next of kin,” or “distributee” found in a trust document creates an ascertainable beneficiary under the trust where each member of the class must give consent prior to the revocation of a trust.
Revocability of an “Irrevocable” Trust
Under New Jersey law, the settlor of an “irrevocable trust” may revoke the trust only with the consent of all those persons who have a remainder interest in the trust. If the settlor is the sole beneficiary of an irrevocable trust, he or she may revoke the trust by his or her own act. The settlor is considered the sole beneficiary when the settlor is the income beneficiary during his or her life and at the settlor’s death, the trust conveys the remaining property to settlor’s estate, or to those beneficiaries the settlor may designate by will or other instrument.
The Legal Effect of Designating “Next of Kin”, “Heir”, “Heir at Law”, or Distributee Under the Trust Document
A settlor may or may not be the sole beneficiary of a trust when the settlor is the income beneficiary but at the settlor’s death, the trust conveys the remaining property to the settlor’s “next of kin.” The settlor’s intent determines whether this distribution creates a return of trust income or corpus to the settlor or whether it creates a class of beneficiaries who meet the criteria of next of kin. When trusts have been created primarily for the creator’s benefit or when trust assets are allowed to be used for a settlor’s needs, courts have held that the settlor intended to create a reversion to himself despite naming his next of kin to receive trust assets at the settlor’s death. (N.J. Super. at 590, 76 A.2d at 43 Fidelity Union Trust Co., 135 N.J. Eq. at 139, 37 A.2d 675, 678.) Where the settlor’s use of the term “next of kin” creates a reversionary interest in the settlor, the settlor may revoke the trust by his own act.
There is no case law stating whether the settlor’s general designation of his/her “heir,” “heir at law,” or “distributee” to receive trust assets creates a beneficiary of the trust who must give consent prior to the revocation of a trust.
To discuss your NJ trust matter, please contact Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Trusts Attorney