Do Changes Need to Be Made to a Trust If I Buy or Sell Assets?

This is an article from the Law Offices of Richard B. Schneider, LLC (https://www.rbsllc.com/) in Portland, Oregon, that we thought others may find helpful.

When creating a comprehensive estate plan most people include documents in addition to a Last Will and Testament. One common addition to a thorough estate plan is a trust. In fact, some people include several trusts in their estate plan because of the variety of trusts available and the flexibility a trust offers. One question that people often have when contemplating including a trust in their estate plan is whether the trust has to be changed, or modified if they buy or sell assets.

Before answering that question it is important to have a basic understanding of the types of trusts that can be created. First, a trust is either a testamentary or a living trust (formally referred to as an “inter vivos trust”). A testamentary trust only takes effect when you die whereas a living trust takes effect while you are alive. Additionally, a trust can be irrevocable or revocable. An irrevocable trust cannot be changed, modified, or revoked by you once it becomes effective. A revocable trust can be changed, modified, or revoked by you at any time during your lifetime.

Whether or not any changes need to be made to a trust as a result of a sale or purchase of assets depends on the type of trust you created and the terms of the trust. Remember that once an asset is transferred into a trust the asset becomes trust property. If the trust is a revocable living trust you may be the trustee of the trust and, therefore, retain control over the asset as the trustee; however, the asset is actually owned by the trust. Therefore, the trust can sell the asset or you could direct the trust to give you back the asset. Neither requires a change to the actual trust agreement. Likewise, you could purchase another asset and transfer the asset into the trust, which should also not require changes to the trust documents.

If you created an irrevocable living trust, you give up complete control over assets once they are transferred into the trust because you cannot be the trustee of the trust. If the trust terms allow for the sale of a trust asset then a sale can occur. Likewise if the trust terms allow for a change in funding then a new asset may be transferred into the trust; however, the actual terms of the trust cannot be changed.

If you have additional questions about trusts be sure to consult with your estate planning attorney.