Given the frequency with which trusts are included in an estate plan, there is a very good chance that your estate plan will eventually include a trust, if it doesn’t have one already. There is an equally good chance that as you move through the various phases of your life, changes in your life will prompt the need to make changes to your estate plan, including your trust. The Port St. Lucie revocable living trust lawyers at Kulas & Crawford discuss when you can modify a trust and what options you have for carrying out the desired modification.
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.
Revocable vs. Irrevocable – Why It Matters If You Want to Modify
The type of trust you create will directly impact your ability to modify the trust. Living trusts can be sub-divided 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. Testamentary trusts are always revocable.
Consequently, if you created a revocable living trust or a testamentary 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.
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 to attach to the original trust agreement. 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 and starting from scratch. 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 Port St. Lucie Revocable Living Trust Lawyers
For additional information and assistance, please FREE solid estate plan checklist. If you have specific questions about how to modify a trust, please contact the experienced Port St. Lucie revocable living trust lawyers at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
