Creating an initial estate plan is a crucial first step in protecting yourself, your assets, and your loved ones. Estate planning, however, is not something that is every truly “finished.” Over the course of your lifetime you will probably make numerous changes to your initial estate plan. For example, you may want to modify a revocable living trust you have in place. A Port St. Lucie revocable living trust attorney at Kulas & Crawford explains how to make changes to your revocable living trust.
What Is a Living Trust?
A trust is a legal relationship wherein property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee appointed by the Settlor. The Trustee holds that property for the trust’s . All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime.
Living trusts can be further broken down into revocable and irrevocable living trusts. If the trust is a revocable living trust 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. Testamentary trusts are always revocable because the Will that triggers activation is always revocable until the Testator’s death.
Can You Make Changes to Your Revocable Living Trust?
The first hurdle you must get past whenever you want to make changes to a trust is whether you can make changes. An irrevocable living trust cannot be modified by the Settlor. Since you created a revocable living trust, however, you have the ability, as the Settlor, to modify the trust at any time. Therefore, you don’t have to worry about that hurdle.
How to Make Changes to Your Revocable Living Trust
The next step in making a change to your revocable living trust is deciding how you wish to go about making that change. Changes can be made to a revocable living trust in all of the following ways:
- Amending the trust – a trust amendment is best when the change you wish to make is minor and the trust has not previously been amended. To amend a trust you will need to locate the provision or term in the original trust agreement that you wish to change. On a separate piece of paper labeled “Trust Amendment” you explain, in detail, the change you wish to make to the original agreement. The paper with the amendment is then attached to the original trust agreement. State law may require additional steps, such as including the Trustee’s signature on the amendment and/or signing the amendment in front of a notary.
- Creating a trust restatement – a trust restatement is best if you have more extensive changes to make and/or the trust has been amended several times in the past. 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. As is the case with an amendment, state law may impose additional requirements relating to the execution of the restatement.
- Revoking the trust and starting over – revoking a trust sounds much the same as restating a trust; however, there are important differences. Although the procedure is virtually identical, the language makes a huge difference. A restatement is almost always preferable to revoking a trust because 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. Even though the trust assets are only technically out of the original trust for as long as it takes to sign the new trust agreement, the fact that they were legally removed at all can have unintended tax consequences that can almost always be avoided by using a restatement instead of revocation.
Contact a Port St. Lucie Revocable Living Trust Attorney
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about making changes to a revocable living trust, please contact an experienced Port St. Lucie revocable living trust attorney at Kulas & Crawford by calling (772) 398-0720 to discuss your legal options.