How to Modify an Irrevocable Trust in Florida

An irrevocable trust in Florida can be modified, terminated, or restructured through several statutory and common law mechanisms. Despite the name, “irrevocable” does not mean the trust terms are permanently fixed. Florida’s Trust Code provides four primary methods for changing an irrevocable trust: decanting, judicial modification, non-judicial settlement agreements, and reformation.

Each method carries different implications for the trust’s asset protection features. A modification that weakens spendthrift provisions, changes distribution standards, or adds the settlor as a beneficiary can eliminate the creditor protection the trust was designed to provide.

Decanting

Decanting allows a trustee to distribute all or part of one irrevocable trust’s assets into a new irrevocable trust with different terms. Florida Statutes § 736.04117 authorizes decanting when the trustee has discretionary authority to distribute trust principal.

The new trust can modify virtually any term of the original trust, including the distribution standard, the identity of beneficiaries, the trustee provisions, and administrative powers. Decanting does not require court approval or the consent of the beneficiaries. The trustee exercises the decanting power unilaterally, subject to fiduciary duties.

Decanting is the most powerful and flexible modification tool available. Common uses include converting a support-standard trust to a pure discretionary trust, adding spendthrift provisions that were missing from the original trust, removing or adding beneficiaries, extending the trust’s duration, and consolidating or splitting trusts.

Asset Protection Implications

Decanting can strengthen asset protection by tightening the trust’s distribution language. An older trust drafted with a health, education, maintenance, and support standard gives the beneficiary an enforceable right to distributions, which creditors—including the IRS—can reach. Decanting that trust into a new trust with a pure discretionary standard eliminates the enforceable right and removes the property interest to which a lien could attach.

Decanting can also weaken protection if it expands the class of beneficiaries to include the settlor, effectively converting the trust into a self-settled arrangement. Under § 736.0505(1)(b), the settlor’s creditors can reach the maximum amount distributable to the settlor, regardless of spendthrift or discretionary provisions.

Judicial Modification

A trustee or qualified beneficiary may petition a Florida court to modify or terminate an irrevocable trust under § 736.04113. The court has broad discretion to amend trust terms, change distribution provisions, terminate the trust, or authorize actions not permitted by the original trust agreement.

Judicial modification is available when the purposes of the trust have been fulfilled, have become illegal, or are impractical to fulfill. It is also available when unanticipated circumstances exist and compliance with the trust terms would substantially impair the accomplishment of a material purpose.

The court must consider the terms and purposes of the trust, the facts and circumstances surrounding its creation, and any extrinsic evidence relevant to the proposed modification. The court must also consider whether the trust includes spendthrift provisions and how the modification would affect them.

When Judicial Modification Is Necessary

Judicial modification is typically required when the other methods are unavailable. If the trustee lacks discretionary distribution authority, decanting is not an option. If the beneficiaries cannot reach unanimous agreement, a non-judicial settlement agreement fails. Judicial modification provides a path forward in contested or complex situations where informal methods are insufficient.

Courts have broad authority under § 736.0201, including the power to modify distribution terms if doing so serves the settlor’s intent or the beneficiaries’ best interests.

A court may also terminate a trust whose value has declined to the point where the cost of administration exceeds the benefit to the beneficiaries under § 736.0414.

Non-Judicial Settlement Agreements

Florida Statutes § 736.0111 permits interested parties to resolve trust matters through a binding written agreement without filing a court action. A non-judicial settlement agreement can modify trust terms, change trustees, interpret ambiguous provisions, and address administrative issues.

When the settlor is alive and participates in the agreement, the parties have broad authority. Florida common law, confirmed in Demircan v. Mikhaylov (Fla. 3d DCA 2020), recognizes that when the settlor and all beneficiaries consent, an irrevocable trust can be modified, amended, or even revoked entirely.

When the settlor is deceased, a non-judicial settlement agreement between the trustee and all qualified beneficiaries is valid only if the agreed terms could have been approved by a court under the Florida Trust Code. The agreement cannot produce a result that the Trust Code would not authorize.

Non-judicial settlement agreements offer speed, privacy, and lower cost compared to judicial proceedings. Because they are not filed with any court, the terms of the modification remain private—an advantage for families seeking to avoid public disclosure of trust assets and beneficiary information.

Reformation

Reformation under § 736.0415 allows an interested person to petition a court to correct mistakes in the trust instrument. Reformation applies when clear and convincing evidence shows the trust as drafted does not reflect the settlor’s intent due to a drafting error, scrivener’s mistake, or ambiguity.

Reformation does not change the settlor’s intent. It corrects the trust document to accurately express the intent that already existed when the trust was created. Courts can grant reformation even when the trust language is unambiguous if the evidence demonstrates a gap between the written terms and the settlor’s actual purpose.

Reformation is narrower than modification. It corrects mistakes rather than adapting the trust to changed circumstances. An attorney who drafted a trust without spendthrift language when the settlor clearly intended asset protection could seek reformation to add the missing provision, provided the evidence supports the original intent.

Trust Protector Powers

Many irrevocable trusts appoint a trust protector with authority to modify specific trust terms without court involvement. The trust protector is an independent third party—not the settlor, trustee, or a beneficiary—who holds powers defined in the trust instrument.

Common trust protector powers include the authority to change the trust’s governing law, remove and replace trustees, add or remove beneficiaries, and modify distribution standards. A trust protector who holds these powers can accomplish modifications that would otherwise require decanting or judicial action, and can do so faster and with no cost beyond the protector’s fee.

From an asset protection perspective, the trust protector plays a critical role in maintaining the trust’s protective features over time. A protector who can convert a support trust to a discretionary trust in response to a beneficiary’s creditor exposure provides a responsive layer of protection that static trust terms cannot offer.

Transferring Assets Out of an Irrevocable Trust

Removing assets from an irrevocable trust requires either a distribution to a beneficiary under the trust terms, a decanting into a new trust, or a court-ordered termination. The trustee cannot simply return assets to the settlor without one of these mechanisms authorizing the transfer.

Distributions to beneficiaries must comply with the trust’s distribution standard. If the trust permits only discretionary distributions, the trustee decides whether and when to distribute. If the trust requires distributions for support, the trustee must distribute when the beneficiary demonstrates a support need.

Once assets leave the trust, they lose the trust’s creditor protection. A beneficiary who receives a distribution from a protected irrevocable trust now holds those assets personally, exposed to the beneficiary’s own creditors. Timing distributions around active creditor claims can create fraudulent transfer issues for the trustee.

Terminating an Irrevocable Trust

An irrevocable trust can be terminated through several paths. Judicial termination under § 736.04113 is available when the trust’s purposes have been fulfilled or can no longer be achieved. Non-judicial termination by agreement of the settlor and all beneficiaries is permitted under Florida common law.

A trust can also effectively terminate when all assets are distributed or when the trust becomes uneconomic under § 736.0414. An uneconomic trust is one whose value is too small to justify ongoing administration costs. The court can order distribution of the remaining assets consistent with the trust’s purposes.

Termination eliminates the trust’s creditor protections for the distributed assets. Beneficiaries who receive outright distributions own those assets personally. Families seeking to preserve long-term protection should consider decanting into a new trust rather than terminating, because decanting maintains the trust structure and its associated creditor protections.

How Modifications Affect Asset Protection

Every modification to an irrevocable trust should be evaluated for its impact on the trust’s creditor protection features. Modifications that strengthen protection include converting a support standard to a pure discretionary standard, adding missing spendthrift provisions, and removing the settlor from the class of beneficiaries.

Modifications that weaken protection include adding the settlor as a beneficiary, broadening distribution standards to include mandatory distributions, and terminating the trust with outright distributions to beneficiaries. A modification that benefits the beneficiaries in one respect may expose them to creditor claims in another.

The interaction between modification and asset protection is the dimension that most trust administration overlooks. Any proposed change to an irrevocable trust should be reviewed for creditor protection consequences before it is executed.