A living trust is an effective tool for ensuring your financial wishes are carried out. It ensures your heirs receive the property and assets you’re entitled to without going through a probate process.
If you have a revocable trust and its terms no longer reflect your needs or wants, you may be wondering…
Can a revocable trust be changed?
The short answer is: Yes. After it’s established, a revocable trust can be altered as long as the individual that set it up is:
The reality is your revocable living trust can – and should – keep up with all of your life changes.
A revocable living trust is a legal document that you can to own your assets in it while you are living and then transfer those assets to someone else upon your death, without those assets having to go through a long and expensive court process known as probate. The trust document details who set up the trust, who has control over the assets in the trust, who the assets will eventually transfer to upon a death, and any restrictions or protections regarding the assets.
Living trusts in California generally fall into two categories: Revocable trusts and irrevocable trusts.
The difference between these two types of trusts lies mainly in who has control over them, how they can be amended, and who can change them.
In the case of irrevocable trusts, the person who set up the trust, also known as the “trustor,” transfers assets into the trust so such assets becomes completely out of their control. This is typically done when someone is trying to reduce their estate tax liability, or protect the assets from a future ill-intentioned third party, or qualify for government benefits. When the trustor dies, the trustee (the person in charge of the irrevocable trust)is responsible for distributing the assets to the person)s) identified in the trust as the beneficiary(ies).
It’s difficult to change an irrevocable trust. In many cases, such changes would require court approval, and then only in very specific circumstances and with the consent of the trust’s beneficiaries.
Revocably trusts, on the other hand, are very flexible and allow the creator of the revocable trust to maintain control over the assets while they are living. Typically, the creator (also called the trustor) is also named as both the current trustee (the person in charge) and the beneficiary (the person who benefits from the assets). The trust must specify who will receive the assets when the creator dies and any restrictions or protections regarding those assets.
People usually change their trust (also called a trust amendment) when the trust creator experiences a significant life change, or they wish to change who would be in charge of their trust if something happened to them, or change the trust beneficiary or how the assets would go to that beneficiary. Some common life events that lead to revocable trust amendments include:
. It’s important to regularly review the terms of your trust as your life changes so you can ensure the terms are in line with your wishes.
In general, the only person who can make changes to a revocable trust is the trustor (the person(s) who set it up). Any variation from this sole control over the trust must be detailed in the language of the trust document when it is created.
When the trustor dies or becomes incapacitated, the trust then becomes irrevocable, meaning its terms can no longer be changed. At that point, the successor trustee (the person the trust identified as the next person in charge) steps in and manages the assets until such assets are ultimately distributed to the beneficiary(ies.)s Can a successor trustee change a revocable trust?
The trustor and trustee are often the same person for revocable trusts and in the event of that person’s death, the successor trustees cannot amend the now irrevocable trust. Any changes by the successor trustee must be specifically authorized by the trust document.
Many trustors choose to include language in their trust document that grants their surviving spouse the power to manage and benefit from the trust assets and even change the future beneficiaries of the trust once the surviving spouse dies. The extent of power a surviving spouse has over the trust assets all depends on the terms laid out in the trust itself.
What Can Be Changed in a Revocable Trust?
A revocable trust can absolutely be changed as long as its creator is alive and has mental capacity. Such changes may include who is in charge of the trust when the creator becomes incapacitated or dies, who will benefit from the trust, and any restrictions or protections the creator wants over the assets in the trust.
The trust creator can change the beneficiaries of the trust as long as the trust creator is alive and has mental capacity. Typically, once the trust becomes irrevocable due to the creator’s incapacity or death, changes to the beneficiaries cannot be made. However, many trust creators structure their trust in such a way that empowers the surviving spouse to make changes to the beneficiaries.
The trustor or group of trustors of a revocable trust can legally amend a revocable trust in order to make it irrevocable. However, it’s important to speak with an Estate Plan Lawyer to be aware of and mitigate any tax consequences of changing your living trust from revocable to irrevocable.
Changing a revocable trust isn’t as simple as verbally telling someone or even writing in changes. There are legal formalities that must be followed to ensure that your trust is changed properly and that your wishes are carried out. You should consult with a lawyer to help you make such changes.
Sometimes the original language or terms of the trust document includes specific instructions for how to amend your revocable trust. If those instructions exist, they must be followed closely in order for the changes to your trust to be valid and legal.
If the changes being made to your trust involve the addition or removal of certain trust property or assets, the title of such assets or beneficiary designations must be updated to reflect the ownership of such assets. It’s important that any trust assets or property is properly connected to the trust, either through title or beneficiary designation, depending on the property or asset.
Your attorney will help you amend your trust, either by completing an additional legal document to reflect the changes or by amending and restating your trust in its entirety, meaning you keep the original trust name but have a whole new legal document (as opposed to the original trust document, plus a separate trust amendment).
It’s crucial for the amendment document to be created and executed in the same way the original trust was. This often means the document needs to be notarized.
From a practical standpoint, most trust creators are also the trustee. However, if you have someone other than yourself who is the designated trustee of your trust, you will need to provide them with your trust amendment.
Dissolving – or “revoking” – a revocable trust follows a similar process to that of amending it. You’ll need to transfer all the property and all the assets in the trust back to your name and then complete a trust revocation declaration statement. This statement is similar to an amendment document, except that it states why you wish to revoke the trust and the date of the revocation. Also, know that in most cases, a divorce will automatically revoke/dissolve a joint trust you had with your ex-spouse.
You want to be sure that the changes you make to your revocable trust are completed in a valid and legal fashion. Ensure your wishes regarding your trust are carried out without complicated issues, lengthy legal battles, or other confusion when you’ve passed.
Enlist the help of an Estate Planning Lawyer to draft and make your revocable trust changes.