Also known as:dispositive term · dispositive provisions
Written by attorneys — see sources below.
Provisions in a trust instrument or will that designate the beneficiaries and specify the nature and extent of their interests in the property. These terms stand in contrast to administrative provisions that address only the management and operation of the trust. Under modern statutes a court may modify dispositive terms when circumstances not anticipated by the settlor make the change further the trust purposes.
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Special Needs Trust Conversion
Doris Duffy created a trust directing outright distribution of remainder assets to her grandson upon reaching age thirty. After the grandson suffered a permanent disability in a factory accident that would consume the assets through medical costs, the trustee petitioned to convert the outright remainder into a discretionary special-needs trust. The court approved the change because the disability constituted an unanticipated circumstance and the modification preserved assets while advancing the settlor's purpose of benefiting the grandson.
Unanticipated Circumstance Modification
Dominic Drake established an irrevocable trust directing outright distribution of shares in a family company to his granddaughter at age thirty. When the granddaughter became permanently disabled and dependent on public benefits, the successor trustee sought judicial modification converting the remainder into a discretionary special-needs trust. The court granted the request because the disability was unforeseen and the modification furthered the trust purpose of providing for the granddaughter without dissipating trust value.
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Students Frequently Ask...
What distinguishes dispositive terms from administrative terms in a trust?
Dispositive terms designate beneficiaries and fix the nature and extent of their interests. Administrative terms address only management and operation of the trust. Traditional doctrine permitted modification of administrative terms but not dispositive terms.
Under what circumstances may a court modify dispositive terms of a trust?
A court may modify dispositive terms when circumstances not anticipated by the settlor make the modification further the purposes of the trust. The modification must track the settlor's probable intention to the extent practicable.
Does conversion of an outright remainder into a special-needs trust constitute modification of dispositive terms?
Yes. Changing an outright distribution to a discretionary special-needs trust alters the beneficial interest and therefore modifies dispositive terms. Courts may authorize the change under the equitable deviation doctrine when the beneficiary's disability was unanticipated and the modification preserves assets for the beneficiary.
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