Your desires for your estate plan can change as often as the circumstances of your life can change. As a result, you will occasionally need to consider revising your estate planning documents, such as amending your will.
However, the terms of a trust are not always easy to alter. Not every type of trust can be amended, and the process of amending a trust is different than the process for changing other types of estate planning documents.
Here are a few vital pieces of information for those looking to make changes to a trust.
Understand that not all trusts can be changed
Trusts can be revocable or irrevocable, depending on their terms. Revocable Trusts are sometimes known as living trusts, as they are created during the life of the grantor, who is also the primary beneficiary. Irrevocable trusts can be created during life or created in a will, in which case the do not become effective until after the death of the grantor. Trusts created in a will are often referred to as testamentary trusts.
A revocable living trust is useful for many reasons, not least of which is that it governs your assets during your lifetime, dictates who will receive those assets when you pass away, and permits those assets placed in trust prior to your death to pass outside of probate. .
A revocable trust can be amended or revoked in its entirety. Irrevocable trusts, as the name indicates, are more difficult to amend or revoke, and doing so usually requires a court order.
Modifying the terms of a trust
There are many reasons that a grantor, trustee, or beneficiary may want to change the terms of a trust. Family relationships can change, a beneficiary may begin suffering from an illness that makes it unwise to transfer significant assets to him, or changes in tax law may make certain trust provisions unnecessary. Regardless of your motivation for amending a trust, it is important that you consult with an estate-planning attorney prior to doing so.
In order to amend your revocable trust, you must comply with the requirements of the state law that governs you trust. Engaging the assistance of an estate-planning attorney will ensure both that you are meeting the legal requirements for amending your trust and that the changes you are planning to make will actually achieve your desired result.
Depending on the law of your state, it may be possible to amend an irrevocable trust if you have the consent of the grantor and the beneficiaries. An estate-planning attorney can advise you as to the requirements in your state.
What can be changed by an amendment
With very few exceptions, all of which are dictated by your state’s trust laws, any term of a revocable trust can be changed by amendment.
If your state’s law permits amendments to an irrevocable trust, amendment will likely require the consent of the grantor (if he is still alive), all of the trust beneficiaries and, in some cases, court approval. Typical amendments to irrevocable trusts include:
- Changing the successor trustee or the manner of selecting successor trustees;
- Changing distribution and investment requirements;
- Changing the authority given to trustees and trust protectors
- Dividing a single trust into two or more trusts, or consolidating two or more trusts into a single trust; or
- Terminating the trust and distributing the assets to the beneficiaries.
Why you should consider amending a trust
If you are concerned that a trust cannot be sustained as it is currently written, you should consider whether a trust amendment is the right option to address the issue.
Even if you are required to file a legal action to amend the trust, doing so can circumvent future litigation by the beneficiaries, preserve family relationships and ultimately ensure that your assets will be distributed pursuant to your wishes.
If you are a grantor or beneficiary of a trust that you believe is being poorly administered, or is in need of modification, you may need to take legal action to address that issue. We can help you navigate these issues. Contact us today for a consultation.
