If you are like many estate planners, you will have created a living trust.
Living trusts are extremely useful legal entities: they allow you to pass your assets on to your beneficiaries while avoiding some of the complications of a will. But they can be complicated documents to draft properly.
Now, ideally when you draft a living trust, you will get it right the first time… and this is what you should be aiming for. Realistically, though, this is hardly ever possible. Life circumstances change and unforeseen complications arise that no amount of planning could have prepared you for. And even with the most rigorously planned trust, mistakes do sometimes happen.
All of this brings up the inevitable question: can I modify my living trust once it has been drafted?
The answer is yes, you can modify your trust, so long as it is a revocable trust. In fact, to do so is the norm rather than the exception: most people who make a trust modify it multiple times over the course of their lives.
But although modifying a trust is fairly simple, doing it right can be hard.
Why People Change a Living Trust
As a general rule, living trusts will likely require a revision of some sort after any major change in your life.
A change in marital status. If you get a divorce, this will generally lead to major revisions of your trust. There will be a number of changes to make. For a start, you will likely want to remove your ex-spouse’s name from your trust, along with all of your other accounts. (Unfortunately, a lot of people fail to take this simple but necessary step, which can lead to their ex-spouse inheriting their assets after they die.) Likewise, if you marry or remarry, you should amend your trust to add your new spouse.
A change in the status of one of the beneficiaries. A new child (or grandchild or other beneficiary) may be born. Conversely, a beneficiary may die. These are always big life events, and in the joy of a child’s birth or the grief of a child’s death, amending a trust is often the last thing on your mind. The legal hiccups that can arise from not doing so, however, are well worth avoiding. Similarly, if you wish to add or remove a beneficiary for any reason, you must modify the trust to show this.
A change in successor trustee. Remember, trusts involve three parties: you (the settlor), your beneficiaries, and a successor trustee who will fulfill the terms of the trust after you die. The role of successor trustee is an extremely important one, and it must be occupied by someone you know you can count on. If you have any scruples about the trustee’s competence or morality, then you should seriously consider a change.
A change in distribution. How and when will your beneficiaries get the assets within the trust, and how much will they get? There are all sorts of ways in which you can work this out, and while many settlors want to keep things even, we believe that in many cases the moral obligation is to do what’s right over what’s fair. This may also involve modifying the terms by which they will receive their share of assets. For instance, let’s say your son becomes a drug addict, and you want to make sure that he does not waste his inheritance on substance abuse. You can amend the trust to stipulate that your son must seek treatment before he receives any assets.
An acquisition of property. As you acquire mew property, you will likely need to add it to the trust. This tends to be one of the more straightforward changes, with most trusts providing a mechanism by which property can be readily added. Conversely, if you no longer own property, you will have to remove it from the trust.
A change of laws. This final reason for modifying a trust has nothing to do with your personal life circumstances. Trusts are not merely estate planning vehicles, although that is their primary function. They are also designed to take advantage of a variety of favorable legal provisions, including tax benefits. That said, laws are always changing, and a previous legal benefit may be revoked by the state or federal government. Conversely, a new benefit may emerge which you would like to take advantage of. This can provide an impetus for modification without anything changing in your personal life, and it is worth staying abreast of the latest laws in order to know if any changes need to be made.
How to Change a Trust
Once you have made up your mind that a trust should be changed, the process for doing so is relatively straightforward.
Step 1: Before you write an amendment, read through the trust and re-familiarize yourself with its terms. When you created the trust, you probably laid out a set of rules for how the trust may be amended. This will ensure that you are acting in accordance with the rules and are not missing anything important.
Step 2: To actually amend the trust, you must fill an amendment form. This form must include the name of the trust and the date it was created, as well as what part of the trust you are amending and what you are replacing it with. Give the number of the former article of the trust which you intend to amend, along with the full text of that article. Then, write the text of the amendment.
Tip: Be as specific as possible in writing the amendment. The reason why legal language is so often stilted and repetitive is because with legal matters such as these, there is no room for even the slightest ambiguity. Make yourself as clear as possible in writing the amendment; if it helps, imagine that you’re speaking to a very small child (although one with the vocabulary of an adult, of course).
Step 3: Once you have written out the amendment, sign it and have it notarized.
Step 4: Attach a copy of the amendment to the trust, and keep it, along with the rest of your trust, in a safe place. You should also send copies to the trustee, as well as any other relevant parties including attorneys, accountants, and so forth.
This is a straightforward process, but it is not always an easy one. While you can find some trust amendment forms online, in practice writing an amendment that actually works, and will hold up in court if challenged, is complicated. You should always consult with an attorney before adding any actual amendment to your trust.
Do I Need Anyone’s Permission to Modify a Trust?
If you are the only settlor of your trust, then you can change it unilaterally. You do not need to get permission from the trustee or beneficiaries. Communicating with them to ensure that everyone in the same page is a good idea, but it is not required.
If you are married, however, and you have a shared living trust with your spouse, then you will need their permission for any changes.
Once your spouse has died, you will have the power to change the parts that deal with your property but not those that deal with your spouse’s property. Generally, a trust will divide upon your spouse’s death into two subtrusts, one with your property and one with that of your spouse.
Perhaps counterintuitively, you are allowed to revoke a trust entirely without your spouse’s permission.
How Much of the Trust Should I Change?
It is important to remember that a trust is a comprehensive, holistic document, and that when you change one part of a trust, you are not just changing that part. Your change will have cascade effects which will affect the meaning of the whole document. In many cases, a single change can be enough to render the entire trust incomprehensible or actively harmful to your interests.
That is why you cannot simply change one part of a trust. When you modify a trust, it must generally be modified in its entirety.
This may sound arduous, but it is better than having to deal with the consequences of a deeply flawed trust – and we’ve seen that happen.
Not only that, but when an attorney modifies one version of the trust, they are taking full responsibility for the whole trust, including provisions from previous versions of the trust which they may not have written.
A trust will not always require a significant amount of modification beyond the part of the trust that you are actively attempting to change. However, there are usually at least a few wrinkles to smooth over, and so it is always necessary to have an expert examine the document in full.
One exception to this involves adding property to a trust. If your trust was designed properly, there should be a provision allowing for the addition of new property as a routine matter, and so you will generally be able to do this without thoroughly revising the other parts of the trust.
Revoking a Trust
If a trust requires so many changes that it will be difficult to amend into the form you want, then the best option may be to revoke the trust and write a new one entirely.
This is not a decision that should be taken lightly, as it almost always involves a good deal of time and money.
First, you’ll have to take all of the assets you’ve placed in the trust back out. This will involve going through your property and changing a lot of deeds and titles, and even obtaining entirely new deeds for real estate you’ve placed in the trust. Next, you must fill out an official notice of revocation and have it notarized, and in some cases filed with the court.
Once this is done, then you must build an entirely new trust from the ground up and move all your property into it. Or, if you want to create a will, then you will have to start anew with that instead.
This is always an arduous process. Not only that, but it is very common for some piece of property to get lost in transit, and not make it into the new trust.
Restating a Trust
One somewhat simpler alternative to revoking a trust involves restating a trust.
Restating is somewhere between revoking and modifying. When you restate a trust, you essentially amend the entire thing, writing a new trust document from scratch without revoking your current trust.
Once you have rewritten the trust, you attach the new version to the old trust as an amendment, the only difference being that the full trust is being amended and not just one part. The new version typically includes an opening provision stating that the former version of the trust is hereby fully restated.
Restating allows you to have, for all intents and purposes, a new trust without going to the trouble of revoking a trust and writing it all over again. Of course, a full rewrite of the trust is still not easy and will require a fair bit of effort on your part.
Changing an Irrevocable Trust
Most of what we have discussed thus far applies to revocable living trusts.
If you have an irrevocable trust, then your situation will be very different. Irrevocable trusts cannot be modified once they have been drafted.
With regards to an irrevocable trust, we can only recommend that you put as much effort as you possibly can into drafting them before they are finalized. Planning is always important when creating a trust, but doubly so with irrevocable trusts. This can also allow you to include within the trust a plan by which it may be modified later.
You can change an irrevocable trust in certain circumstances, but this is much harder to do. It is certainly not something you can do unilaterally. You will typically need the consent of the trustee and all of the beneficiaries, and even then, you will probably need to go before the court and make an argument as to why the proposed change is faithful to the original intentions of the trust.
Even if this cannot be done, there are still a few other strategies by which you may be able to modify an irrevocable trust. One of these is decanting, which involves moving the assets into a new trust. Methods such as these are far from simple, though, and that is why we recommend you seriously consider every possibility when drafting an irrevocable trust.
As we mentioned above, modifying a trust is easy. Modifying it correctly is hard.
That is why, when you plan to edit or rewrite your trust, you should always consult with an experienced estate planning attorney.
Reviewing your trust with legal eyes before amending it will not only ensure that the changes you want are implemented effectively, but it can also catch other concerns that might previously have gone unnoticed. This is a process which you only want to go through once, rather than having to amend and re-amend again and again because you did not get things quite right the first time.