TRUST REFORMATION FOR TAX OR GOVERNMENTAL BENEFITS ELIGIBILITY PURPOSES BECOMES LAW

trust reformation in TexasOn May 22, 2017, Governor Abbott signed a new law which allows a trust to be reformed if necessary or appropriate to achieve the tax objectives of the one who created the trust (the “trustor”) or to qualify a beneficiary for governmental benefits and is not contrary to the trustor’s intentions. This bill is similar to the bill passed in the 2015 legislative session which permits a court to reform a last will and testament of a testator (the one who signed the will) for tax objectives or qualify a beneficiary for governmental benefits such as Medicaid. Under the new law (which becomes effective on September 1, 2017), an irrevocable trust can be reformed on a petition of a trustee or beneficiary. Often when trusts or wills are created, a beneficiary may not be disabled but could become disabled prior to the death of the trustor or testator. Under federal laws, there are certain trusts that do not jeopardize public benefits. However, if the trust (whether created in a Will or in a Trust) is not properly drafted, eligibility for valuable public benefits (such as care costs and drugs) could be lost or not obtained.

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