Can You Change the Beneficiary of an Irrevocable Trust?

When planning your estate, an irrevocable trust can offer powerful benefits—from asset protection to tax savings. But what happens if circumstances change and you want to modify the trust’s beneficiaries?

It’s a common question:
Can you change the beneficiary of an irrevocable trust?

The answer is: In certain situations, yes. Depending on how the trust was created, the powers reserved, and state law, you may have legal options for updating the beneficiary designation.

What Is an Irrevocable Trust?

An irrevocable trust is a legal estate planning tool that allows a person (the grantor) to transfer assets out of their estate permanently. This typically means the grantor can no longer alter the trust’s terms or change beneficiaries—unless certain powers were specifically reserved in the trust document.

Once funded, the grantor typically gives up all control, including the ability to modify beneficiaries. In return, irrevocable trusts offer significant benefits, such as:

Asset protection
Tax reduction
Probate avoidance

However, not all irrevocable trusts start that way. Many estate plans use a revocable living trust, which the grantor can change during their lifetime. However, upon the grantor’s death, the trust becomes irrevocable, locking in the beneficiaries and terms—unless the trust contains language or legal mechanisms that allow for future flexibility.

1. Retained Power by the Grantor to Change Beneficiaries

Sometimes, the grantor of an irrevocable trust reserves specific powers at the time the trust is created. These retained powers must be explicitly written into the trust agreement.

One such power may include the ability to:

Change beneficiaries within a defined class (e.g., children or grandchildren)
Substitute one beneficiary for another
Redirect benefits via a testamentary document

While this method allows some flexibility, it can have estate and gift tax implications, so it must be structured carefully.

2. Power of Appointment to Modify Beneficiaries

A power of appointment lets someone (typically the grantor or a beneficiary) change who receives trust assets—either during their life or through their will.

Types of Powers:

General Power of Appointment: Allows the holder to name virtually anyone—including themselves or their estate—as a beneficiary.
Limited (Special) Power of Appointment: Restricts beneficiary changes to a certain group (such as descendants or charities).

This can be an effective way to adjust a trust’s beneficiaries without court approval, provided the power is properly granted and exercised according to state law.

Note: A Power of Appointment is often drafted to be testamentary, meaning the power can only be exercised through a last will and testament. For greater flexibility, a lifetime power of appointment is often preferable, as the power holder can change the beneficiaries during their lifetime

3. Trust Protector Powers

A trust protector is a third party—often a trusted advisor, attorney, or accountant—appointed in the trust document to provide oversight and flexibility.

Common Trust Protector Powers Include:

Removing or replacing a trustee
Amending the trust to comply with new laws
Changing or adding beneficiaries

Granting someone a Power of Appointment
Modifying distributions in response to changed circumstances

Trust protectors are particularly useful in irrevocable trusts created to last multiple generations, where flexibility is essential over time. If your trust includes a trust protector clause, they may have the authority to legally modify the list of beneficiaries without requiring court approval.

4. Trust Decanting: Rewriting the Terms Without Court

Trust decanting allows a trustee to transfer assets from an existing irrevocable trust into a new irrevocable trust with updated terms, including a change in beneficiaries.

When Decanting May Be Allowed:

The trustee has discretionary distribution powers
State law permits trust decanting (not all states do)
The new trust maintains the intent and protections of the original

Benefits of Decanting a Trust:

Add or remove beneficiaries
Update outdated terms
Enhance tax planning or asset protection
Modify trust distributions

Note: New Jersey state law does not address decanting, and there is very little case law on the subject. There is only case on record, Weidenmayer v. Johnson, and while the court allowed a decanting, it is advisable to proceed with caution and avoid testing the limits of what may be permitted.

5. Changing Trust Beneficiaries by Agreement

In many states, all beneficiaries of a trust can agree to modify or terminate an irrevocable trust under a Nonjudicial Settlement Agreement (NJSA).

Requirements for Modification By Consent in New Jersey:

Noncharitable irrevocable trust
Unanimous agreement by all beneficiaries (current and remainder)
Trustee participation
Modification is not inconsistent with a material purpose of the trust

This is a powerful tool when beneficiaries are aligned and want to avoid court involvement.

6. Court Petition to Modify an Irrevocable Trust

If none of the above options are available, a court petition may be necessary. Courts in New Jersey may allow changes to an irrevocable trust if:

If the trust could be modified by unanimous agreement, and the interests of any beneficiary who does not consent will be protected
The trust has become impractical, wasteful or uneconomical
A material change in circumstances justifies the modification
The changes will correct a mistake or more closely conform to the Settlor’s intent

This process can be time-consuming and public, but it remains an important option in complex estate planning cases.

Should You Modify Your Irrevocable Trust?

While irrevocable trusts are generally fixed, there are several legal strategies that may allow you to change the beneficiary of an irrevocable trust. These include:

Retained powers by the grantor
Exercising a power of appointment

Intervention by the Trust Protector

Decanting the trust
Gaining consent of beneficiaries
Petitioning the court

Each approach has legal, financial, and tax consequences. You should always consult with a qualified estate planning attorney near you to determine the best course of action.

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At Paramus Estate Planning, we help individuals and families throughout Bergen County, New Jersey, and beyond.