Like many people, you may have created and included a trust agreement in your estate plan some time ago. Circumstances in your life may now dictate the need to change something about the trust or even terminate the trust altogether. While you should always consult with an experienced trust attorney before attempting to alter or revoke a trust agreement, the trust attorneys at Wilcox Attorneys, PA discuss how to make changes to a trust agreement.
Although there are numerous specialty trusts that accomplish specific goals, all trusts have some basic ingredients in common. For example, all trusts are created by a Settlor, also known as a Grantor, Trustor, or Maker. All trusts also have a Trustee, appointed by the Settlor, whose job is to protect trust assets and administer the trust and at least one beneficiary who receives the benefits of the trust. A trust can be a living trust or a testamentary trust. The former activates during the lifetime of the Settlor while the latter is activated through a provision in the Settlor’s Will at the time of death. A living trust can be revocable or irrevocable, a distinction that becomes important if you want to make changes to the trust agreement.
Options for Making Changes to a Trust Agreement
Before contemplating how to change a trust agreement, you need to make sure the trust agreement can be changed. A revocable living trust can be modified or revoked by the Settlor at any time and for any reason. A testamentary trust can be changed or revoked while the Settlor is alive; however, once the Settlor dies and the trust activates it effectively becomes an irrevocable trust. Finally, an irrevocable living trust cannot be modified or revoked by the Settlor. If the trust in question is anything but a revocable living trust, speak to an experienced trust attorney about your legal options for making changes.
If you want to change something about a revocable living trust you have three options: amending the trust; restating the trust; or revoking the trust. Amending the trust works if the change you hope to make is something relatively simple and straightforward, such as appointing a new Trustee. Amending a trust agreement requires you to write/type out the change you wish to make in detail with reference to the original trust agreement. The amendment needs to be titled as such and signed by you then attached to the original trust agreement.
A trust restatement is best when you want to make more extensive changes to a trust agreement. Restating a trust agreement requires you to rewrite the original trust agreement with the changes you wish to make included. It is critical, however, that you are clear that you are restating the trust, not revoking it. You then need to sign the trust restatement.
Both a trust amendment and a trust restatement may need to be signed in front of a notary and/or signed by the Trustee of the trust.
How Do I Revoke a Trust?
If your intention is to revoke a previous trust agreement and create a new one, you should clearly state that intention in the new trust agreement. While a trust restatement and trust revocation with the creation of a new trust agreement may seem similar, there is an important distinction. When you restate a trust, the trust assets remain in the original trust whereas when you revoke a trust and create a new trust, the assets held in the original trust must legally be transferred out of the original trust and into the new trust. This transfer of assets can have unintended tax consequences.
Contact Our Trust Attorneys
For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about how to make changes to a trust agreement, contact the experienced attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.