I f you want to create a trust that is truly
irrevocable and unamendable, be careful
which jurisdiction you select. In most, if the
terms of an irrevocable and unamendable
trust forbid a distribution to the settlor or beneficiaries,
there is little either the settlor or
beneficiaries can do to get at those funds. But
in a few states such as New York, Oklahoma
and Wisconsin, as well as under English law
and the law of many Commonwealth jurisdictions,
there are circumstances when a seemingly
irrevocable and unamendable trust can
be revoked or amended.’
Section r1.9 of New York’s Estates,
Powers and Trusts Law provides that if a trust
settlor obtains the acknowledged, written
consent of all those beneficially interested
in an unamendable, irrevocable trust, he
may amend or revoke it.’ With these consents,
a settlor can exercise this
Three U.S. states authoritytorevesttitletothe
trust in himself, accelerate the
permit irrevocable,
unamendable
trusts to be
interest of the trust remainder
beneficiaries, and otherwise
alter the dispositive provisions
of the trust instrument as originally
contemplated.’
revoked in certain Of course, it’s illogical to
grant control to a settlor who
instances. parted with all interest in the
trust property Does the law
view the trust beneficiaries, through their
granting consent, as amending or revoking
the trust? If this were so, shouldn’t the law
simply permit the trust beneficiaries themselves
to amend the trust or direct a distribution?
No need to involve the settlor. This is the
rule in New York governing trusts created
wholly for the benefit of charities when it is no
longer economical to administer a trust. Only
the state attorney general, trustee or beneficiaries
may petition the court to terminate the
trust, and distribute the trust assets to achieve
the trust’s charitable purposes. 4
Jurisdictions outside the United States
avoid the incongruity of permitting trust settlors
to exercise authority over trusts in which
they do not hold an interest. Under English
law, for example, trusts are largely viewed as
the equitable equivalent of gifts at common
law As such, settlors cannot enforce them.
Even an action against the trustees claiming
they administered the trust in a manner
inconsistent with the reasonable expectations
of the settlor must be brought, not by the settlor,
but by one or more beneficiaries-as
they are the donees (albeit only in equity) of
the settlor’ s gift.
Indeed, Saunder v. Vautier’ long ago established
one of the most cherished rules of
English law; one no law student forgets: If all
the beneficiaries of a trust are in existence and
all are of full age and capacity, they can
together direct the trustees to transfer the
whole of the trust property to them or as they
otherwise direct.
Of course, it is easy to avoid “the Saunders
rule.” After all, the entire beneficial class of a
trust is rarely in existence until quite close to
the end of the trust period. The rule is also
readily defeated by adding a provision to the
trust that requires some third party involvement
to determine ultimate vesting.
The Saunders rule does not empower
beneficiaries to dictate trustees’ behavior.
They cannot, for example, require trustees to
retire in favor of others 6 or demand an invest- , 7
ment policy contrary to the trust instrument.
And, although they may direct the trustees to
deliver trust property to trustees of a new
trust that includes whatever provisions they
want, the trust assets will necessarily pass
through the beneficiaries’ ownership with all
that implies in terms of taxation, exposure to
creditors and so on.
In practice, therefore, the Saunders rule will
generally be circumvented. Nevertheless, it
underpins much of English trust thinking,
whose fundamental premise is that, from the
point of settlement onwards, the trust property
is the beneficiary’s, and the settlor retains an
interest only to the extent that he specifically
reserves that interest in the trust instrument.
The Saunders rule also applies in most
countries that derive their jurisprudence from
English law However, there are exceptions.
The Bahamas have legislated to overrule it,
and maintain the trust for so long as there is
9 apparent reason to do so. Both Guernsey and
Anguilla give settlors standing to apply to the
court with respect to the execution, administration
or enforcement of their trusts or in
relation to the trusteeship.'”
Still, the rule in Saunders v Vautier-and all
the intellectual baggage it carries-is alive and
well throughout England and the rest of the
Commonwealth. And that includes barring
settlors from initiating a process through
which the trust can be amended or revoked. I
PERSPECTIVES
Endnotes
1. New York’s Estates, Powers and Trusts Law,
Section 7-1.9; 60 Oklahoma Statutes, Section
175-41W; isconsin Statues, Section 701.12.
2. The Oklahoma and Wisconsin statutes are similar.
Under New York law, the consent of living
contingent remaindermen is necessary, but not
the consent of unboms. See, for example,
Matter of Roth, 423 N.Y.S.2d 25 (1st Dept.
1979). The consent of a beneficiary who is a
minor or otherwise under a disability is, however,
necessary Rosner v. Caplow, 456 N.Y.S.2d 50
(1st Dept. 1982). Some cases have held that the
consent of a beneficiary who is a minor is
unnecessary to amend a trust where the trust
amendment is clearly for the benefit of the beneficiary
Matter of Cord, 58 N.Y.2d 539 (1983);
Haber v. Wachtel, N.Y.L.J., Jan. 18, 2001, p. 28,
col. 6 (Supreme Court, New York County).
3. Under Section 11-1.11o f New York’s Estates,
Powers and Trusts Law a fiduciary also has limited
authority to amend a trust instrument, but
only to accomplish certain tax benefits and
only if the amendment has “no significant dispositive
effect.”
4. New York’s Estates, Powers and Trusts Law,
Section 8-u(c).
5. (184!] Cr. & Ph. 240 (1841).
6. Re Brockbank li948] Ch. 206.
7- Stephenson v Barclays Bank Trust Co Ltd. [1975]
l WLR882.
8. Ibid.
9. Sections 86 and 87 of the Bahamian Trustee Act
1998.
10. Article 63 Trusts (Guernsey) Law 1989 and
Section 58 of the Anguillan Trusts Ordinance
1994·
Under
English law,
settlors
can’t revoke
or amend an
irrevocable
trust. But
beneficiaries
can