Modifying a Special Needs Trust Laws in California

Law Relating to Modification of the Special Needs Trust The statutes covering special needs trusts (Prob. Code, 3600 et seq.) do not include specific reference to modification. We therefore look to other provisions of the Probate Code dealing generally with modification of trusts. Subject to circumstances not relevant here, "if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court." (Prob. Code, 15403, subd. (a).) Because Ashley, through her court-appointed guardian ad litem, objected to modification of the special needs trust, section 15403 does not apply. Probate Code section 15404, subdivision (a) permits the settlor and all trust beneficiaries to petition for modification of the trust. As noted, ante, Ashley did not consent to modification, so this subdivision of section 15404, too, is inapplicable. Subdivision (b) of section 15404 provides: "If any beneficiary does not consent to the modification or termination of the trust, upon petition to the court, the other beneficiaries, with the consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the beneficiaries who do not consent are not substantially impaired." Michael does not dispute in his appellate brief that the proposed modification would substantially impair Ashley's interests; therefore, section 15404, subdivision (b) also does not apply. The probate court also has the authority to modify the dispositive provisions of a trust "if, owing to circumstances not known to the settlor and not anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially impair the accomplishment of the purposes of the trust." (Prob. Code, 15409, subd. (a).) Nothing about the circumstances surrounding the special needs trust has changed. Indeed, the purpose of the trust--ensuring Audrey's eligibility for government benefits during her lifetime--has been achieved. Therefore, section 15409, subdivision (a) of the Probate Code does not apply. Finally, "at common law, a trial court had the equitable power to reform an irrevocable trust where a drafting error defeats the trustor's intentions. Ike v. Doolittle (1998) 61 Cal.App.4th 51 confirms that this authority remains today. " (Bilafer v. Bilafer (2008) 161 Cal.App.4th 363, 369.)