As the name implies, revocable trusts can be modified fairly easily, and that’s a big reason why they are such useful estate planning tools: as life takes twists and turns, revocable trusts can be readily adjusted to reflect new circumstances and intentions. Read on for guidance from attorneys on modifying revocable trusts through amendments and restatements.
Flexibility and Control: Revocable Trusts
Revocable trusts, also referred to as living trusts, are the most common type of trust. Part of the appeal is that when a revocable trust is established, the grantor who creates it retains control of the assets, and can make changes at any time. Shifts in assets, health, and family circumstances, such as births, deaths, marriages and divorces, are important reasons to review the terms of the trust. As estate planning attorney, Barry D. Horowitz points out, even without major life changes, it’s wise for grantors to review their revocable trusts every few years to ensure that the terms still match intentions: “Estate planning is not static. Over time, family dynamics shift, finances change, and your wishes may evolve. A benefit of a living trust is that it can adapt with you because there are legal methods to change the terms of a revocable living trust.” According to Horowitz, the options for changing a revocable trust include amending it and reinstating it:
- The most straightforward way to change a trust is through an amendment. This document modifies specific sections without rewriting the entire trust. For example, you could change a distribution percentage, update a beneficiary’s name, or appoint a new successor trustee….The amendment must be prepared in writing, signed by you as the grantor, and executed with the same level of formality as the original trust. …This may include notarization. Proper drafting prevents confusion and helps avoid disputes among beneficiaries later.
- If your trust has been in place for many years and has gone through several amendments, restating it may be a better solution. A trust restatement replaces the entire original document with a new version that incorporates all current terms. The name and date of the trust stay the same, which means you do not need to retitle assets already owned by the trust. Restating is often chosen when a trust has multiple amendments…or when sweeping changes are desired. This approach produces one clean, updated document while preserving the legal continuity of the original trust.
If life circumstances and intentions of the grantor of a trust have gone through major changes, completely revoking the trust and starting over with a new trust may make the most sense. However, if a trust is revoked, the assets held in it must be carefully attended to as well: “The key consideration with revocation is asset ownership. Assets held in the old trust must be transferred into the new trust to remain covered. Overlooking this step can leave property exposed to probate and undermine the purpose of having a trust in the first place.” Horowitz also warns that handwritten changes in a trust document “do not carry legal weight, and can spark disputes,” and reminds us that relying on verbal instructions to family members is risky too.
Good To Know: What Is A Trust?
Attorneys at Frank and Kraft offer this helpful explanation of trusts:
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. Trusts are broadly categorized as testamentary or living trusts with the former activating after the Settlor’s death and the latter activating during the Settlor’s lifetime.
When considering a trust, it’s smart to work with an attorney who can advise on the type of trust, such as irrevocable, special needs, asset protection, and charitable, that makes the most sense based on familial goals and circumstances. An attorney can also provide guidance on carefully selecting the trustee who will oversee the administration of the trust. A trustee can be a relative, friend or professional, and must be prepared to manage and distribute the assets in the trust, in accordance with the terms established by the grantor and recorded in the trust document. Ultimately, whether a professional, friend, or relation is selected, the trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement may require a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law.
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