If you have ever pondered “changes to my living trust” and whether or not you can make changes to it, this informative article will let you know exactly what you can do.
A living trust is one of the most popular estate planning tools, due in large part to the numerous and varied goals that can be furthered using a living trust. One of the primary functions of a living trust is to distribute assets to designated beneficiaries. What happens though, if you want to change how those assets are distributed or to whom they are distributed after your trust is in place? To help you better understand your options, the Tucson living trust attorneys at Morris Hall PLLC explain how to make changes to your living trust.
Trust Fundamentals
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee, who is appointed by the Settlor, holds that property for the trust’s beneficiaries. A successor Trustee is also customarily appointed. A trust beneficiary can be an individual, an entity (such as a charity or religious organization), or even the family pet. A trust may also have numerous beneficiaries at the same time as well as having both current and future beneficiaries.
Is Your Trust Revocable or Irrevocable?
The type of trust you create will directly impact your ability to modify the trust. Living trusts can be subdivided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time and for any reason. An irrevocable living trust, on the other hand, cannot be modified or revoked by the Settlor at any time nor for any reason once active. It may be possible to modify or terminate an irrevocable living trust by agreement of the beneficiaries and/or by court order, but never by the Settlor.
Consequently, if you created a revocable living trust you have the ability, as the Settlor, to modify the trust at any time. If, however, you created an irrevocable living trust, you cannot modify the trust. The terms of the trust will dictate whether the trust beneficiaries are able to do so or not; however, under no terms may you modify the trust. If the beneficiaries cannot modify the trust, you will need to petition a court for the right to modify or terminate the trust.
How to Modify Your Revocable Living Trust
Once you have established that you have the authority to modify, or even revoke, your trust, you must decide which method to use to carry out the modifications. There are three ways in which you can modify your revocable living trust, including:
- Creating a trust amendment. An amendment is your best option when the change you wish to make is minor and the trust has not previously been amended, or the previous amendment was also minor. To amend a trust you locate the provision or term in the original trust agreement that needs to be modified and explain in detail the change you wish to make to the original agreement on a separate piece of paper. That paper, which includes the amendment, is then attached to the original trust agreement. State law may require you to sign the amendment in front of a notary and/or may require that the Trustee sign the amendment as well.
- Creating a trust restatement. When you have more extensive modifications you wish to make and/or the trust has been amended several times already, a trust restatement is generally the best option. A trust restatement involves rewriting the original trust agreement with the changes included. You must be clear that you are not revoking the original trust, simply restating it. Like an amendment, you may need to execute the restatement in front of a notary and the Trustee may also need to sign the restatement.
- Revoking the trust. You may wonder why you would want to go to the trouble of “restating” the original trust if it effectively requires you to rewrite the entire trust agreement. Why not simply start from scratch? The reason why a restatement is almost always preferable to revoking a trust is that when you revoke the trust, all assets held by the trust revert back to the original owner and must then be transferred back into the trust once again. Doing this can have a number of unwanted ramifications, including tax consequences.
Contact Our Tucson Living Trust Attorneys
There are many benefits in including a living trust as part of your estate plan. For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about creating or modifying a living trust, contact the experienced Tucson living trust attorneys at Morris Hall PLLC by calling 520-320-5100 to schedule your free consultation today.
In fact, estate planning, asset preservation and probate law have been our only areas of practice. We are proud to have helped thousands of individuals of all levels of wealth and assets, people concerned about protecting their families from the devastating legal and financial effects of disability and death.
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