Though once thought of as only benefitting the wealthiest among us, trusts are now commonly used by the average person to accomplish a wide range of estate planning goals. If you do include a revocable trust in your estate plan, you may later find that you want to modify, or even revoke, that trust. You may be surprised to learn that modifying or revoking a trust if often easier than making changes to your Last Will and Testament; however, if the proper steps are not followed, an attempt to modify or revoke a trust can wreak havoc on your overall estate plan. A Moline revocable trust attorney at Nash, Nash, Bean & Ford, LLP explains how to modify or revoke your revocable trust to ensure your estate plan is not adversely affected.
Understanding Your Trust
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 holds that property for the trust’s beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, activates during the Settlor’s lifetime.
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. Testamentary trusts are always revocable because the Will that triggers activation is always revocable until the Testator’s death.
Modifying Your Revocable Trust
There are two ways in which you can accomplish your goal of making changes to an existing trust, including:
- Trust Amendment – a true amendment is best when the change you wish to make is minor and the trust has not previously been amended. To amend a trust you will need to locate the provision or term in the original trust agreement that you wish to change. On a separate piece of paper labeled “Trust Amendment”, you explain, in detail, the change you wish to make to the original agreement. The paper with 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 include the Trustee’s signature on the amendment.
- Trust Restatement – a trust restatement is best if you have more extensive changes to make and/or the trust has been amended in the past. 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 Your Trust
When you create a revocable trust, you always have the option to revoke the original trust agreement for any reason and at any time. Most revocable trusts include a provision that addresses revocation of the trust. That provision typically indicates what you need to do to completely revoke the trust should you decide to do so at any point after the trust’s creation. If there is no revocation provision, a revocable living trust can usually be revoked by any action on your part that clearly shows your intent to revoke the trust. It is best, however, to execute a document entitled “revocation of Living Trust” to ensure that the revocation is accomplished correctly. Before you can revoke the trust, however, all assets held by the trust must be transferred out of the trust. This is why a restatement is generally the better option if you plan to continue to hold those assets in a trust. Once they are officially transferred out of the trust you may face unwanted tax consequences.
Contact Moline Revocable Trust Attorneys
For additional information, please download our FREE estate planning worksheet. If you have questions or concerns regarding modification or revocation of a revocable trust, contact the experienced Moline revocable trust attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.