Under what circumstances may the court modify and/or terminate an existing trust in Georgia?

In Georgia, pursuant to O.C.G.A. § 53-12-64(b), a court has the ability to terminate a trust and order distribution of property if the costs of administration are such that the continuance of the trust would defeat or substantially impair the purpose of the trust, if the purpose has been fulfilled or is illegal/impossible to fulfill, or if unanticipated circumstances defeat or substantially impair the accomplishment of the purpose. Under O.C.G.A. § 53-12-65, a court may also modify or terminate a trust or remove a trustee and appoint a different trustee in the event that the costs of administration exceed the value of trust property.

In Ovrevik v. Ovrevik, 242 Ga. App. 95 (2000), the trial court terminated the revocable inter vivos trust of Sverre and Marie Ovrevik after it found that the purpose of the trust had been fulfilled. The Ovreviks established the trust to support themselves during the entirety of their lives, and the trust stated that the remaining assets should be distributed upon their deaths. In determining the issue of whether the purpose of the trust was fulfilled, the trial court found that the trust plainly stated it was for the “use and benefit of: Sverre L. Ovrevik and Marie W. Ovrevik.” When both beneficiaries died, the trust was to be divided as described in the trust instrument. The trial court looked at the plain language of the trust and determined that since the sole purpose of the trust was for the “use and benefit” of the Ovreviks until their deaths, the purpose was fulfilled after the death of the last surviving beneficiary, which permitted judicial termination of the trust pursuant to O.C.G.A. § 53-12-64(b)(2). The Court of Appeals of Georgia affirmed this decision and also determined that the probate court did not misconstrue the purpose of the trust when it held that the trustee’s failure to distribute certain trust property following the death of the beneficiaries was entirely separate from the issue of whether the purpose of the trust was fulfilled.

In Smith v. Hallum, 286 Ga. 834 (2010), the Supreme Court of Georgia held that the trial court abused its discretion when it modified a trust to cut off distributions to a beneficiary who tried to kill his grandmother. The Court determined that the attack by the beneficiary qualified as an “unintended circumstance” under O.C.G.A. § 53-12-64(b)(3) because he was only 7 years old when the trust was made and the potential attack was not contemplated by the settlor. However, the Court ultimately decided that the trust should not have been modified because making distributions to the grandson would not “substantially impair” the accomplishment of the trust purpose, which was to provide for the descendants of the settlor. In support of its decision, the Court stated that the distributions could be used to treat the beneficiary’s mental illness, which could be considered caring for the settlor’s descendants.

The attorneys at Aitkens & Aitkens, P.C. have extensive knowledge and experience in trust administration, trust modification and termination, and other trust litigation.