A comprehensive estate plan will almost always employ ancillary documents in addition to a Last Will and Testament in order to accomplish all of the plan’s goals and objective. One of the most popular of these ancillary documents is a Living Trust. In fact, your estate plan may include more than one trust agreement given how flexible a trust can be. Of course, most people also find that their estate planning needs and goals change as they move through the various stages of their life. What happens if you decide you want to make changes to an existing trust agreement? What if you want to revoke the trust agreement entirely? The attorneys at Nash Bean Ford & Brown, LLP explain how to modify or revoke a trust.
The Elements of a 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, Maker, or Trustor who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Trusts have evolved to the point where there is a specialized trust to help further almost any estate planning goal; however, all trusts require the same five elements for creation, including:
- Settlor – the person who creates the trust. A Settlor may also be referred to as the Grantor, Maker or Trustor of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary – a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets. A trust may have both current and future beneficiaries.
- Terms – created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding – almost anything of value can be used to a fund a trust, including cash, securities, and real property.
Testamentary vs. Living Trusts
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.
Revocable vs. Irrevocable Trusts
The first question you must consider if you desire to modify or revoke a trust is whether the trust you establish is a revocable or an irrevocable trust. 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. It may be possible to modify or terminate an irrevocable living trust by agreement of the beneficiaries and/or by court order, but never by the Settlor. Testamentary trusts are always revocable during the Settlor’s lifetime.
Modifying or Revoking a Trust
In most states, the only way to modify or revoke an irrevocable trust is by petitioning a court. Illinois, however, enacted the Illinois Virtual Representation Statute not long ago which allows a Trustee and certain beneficiaries to modify an irrevocable trust without having to petition a court. Instead, the parties are able to enter into a legally binding non-judicial settlement agreement.
If the trust is a revocable trust, it can be modified using a trust amendment or a trust restatement. A Trust Amendment is a document that you attach to the original Trust Agreement that includes the changes you wish to incorporate into the trust and can be used to make minor changes to a trust agreement. A Trust Restatement essentially requires you to rewrite the original Trust Agreement in its entirety, incorporating the changes you wish to make into the Restatement and should be used to make more extensive changes and/or if the trust has been amended numerous times already.
Revoking a revocable trust can also be accomplished fairly easily. The first step is to transfer all trust assets out of the trust and re-title them to the new owner. You can then execute a “revocation of Trust Agreement” document in front of a notary public that indicates your intention to revoke the existing trust agreement.
Contact Living Trust Attorneys
If you have questions or concerns regarding the modification or revocation of a trust in the State of Illinois, contact the experienced attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.