When someone dies, his or her estate plan becomes irrevocable.  That means the plan cannot be changed.  Sometimes it would be better to modify the plan because of unforeseen circumstances. 

 

      A traditional way to make such a change is to petition the Court for approval to change, give notice to all the interested persons, and if someone is a minor, have a representative appointed by the court to represent that minor.  This can be expensive, take lots of time and may not work. 

 

     An informal option is for an agreement to be signed by all the interested parties, without a court order.  So, if one of those interested parties is a minor child, incapacitated, unborn or unascertainable beneficiary, "Virtual Representation" provides for that person to be represented by another with a substantially identical interest, without a formal and costly court appointment.

 

     How does this work?  George retired from BP (formerly British Petroleum) and had stock worth $400,000.  In December 2010, George died and a trust he established for his son, Sam, and his two grandchildren was funded with the $400,000 of BP stock.  At the time of George’s death, Sam was 22 and his two young children were ages 1 and 3.  The trust is to be managed by a Bank Trust Department.  The Trust instrument said the BP stock could not be sold until the youngest grandchild reaches age 18 at which time the Trust would be divided equally among Sam and his two children.  

 

     We have a problem here.  BP stock has the potential to decline in value because of the oil leaking from their well in the Gulf.  Can the trust be changed without a court proceeding to allow the Bank Trustee to sell some or all of the BP stock and diversify the investments? Yes, this is easy.  The Bank Trust Department and Sam, individually and on behalf of his children, can sign an agreement quickly to allow the sale of the BP stock and reduce the risk of potential losses in the value of the stock that may stem from the oil disaster.  The modification to George’s Trust can happen in a few days, rather than the months it will take to work the agreement through the Court system.

 

     This is a great tool to use when unanticipated events arise that flip a good plan off the tracks.  The parties can get together and modify an estate plan to allow it to accomplish the original goals.