If your estate plan includes a living trust, it has the flexibility to change right along with you. Unfortunately, many people fail to take advantage of their trust provisions as their circumstances change. While changing a living trust is not as daunting as it sounds, it will take a little knowledge and preparation to make the most of your documents.
When Should You Update the Terms of a Living Trust?
Any significant or permanent life changes should trigger a review of your living trust. Even if nothing in the document needs to be modified, a review will allow you to see how your current situation will affect the trust as a whole. As our client, you are entitled to a free review of your plan every three years, and we highly encourage you to take advantage of this perk.
Throughout your life, you may choose to make changes involving your:
- Trustees. You can choose anyone to serve as trustee, and can opt to be trustee yourself. However, you will need to appoint a successor trustee to manage the trust after your passing. You may need to update your selections if a chosen trustee has predeceased you, or a potential trustee has recently come of age.
- Spouse. Marriage and divorce can have a number of implications for your trust. You may need to change your legal name, primary beneficiary, or selection of successor trustee. This should be done as soon as possible to ensure your property is distributed to the right people if something happens to you.
- Beneficiaries. The birth of a new child or grandchild can affect your beneficiaries’ percentage shares, while the passing of a family member may change who receives certain personal items. If you remarry, you may adjust the shares given to your new stepchildren and your children from your first marriage. Also, if you have a family member with a disability, you may need to set up special funds for their future care.
- Location. If you have recently moved to another state, the laws regarding wills, trusts and inheritance may be different than those where the trust was created. If the trust is not recognized, your assets may go through probate and be distributed in accordance with state intestacy laws, as if you never had a trust at all
- Property. The purchase of a home or real estate usually requires an amendment to your revocable living trust. Any property that is not included in the trust will have to go through probate, potentially costing your heirs a significant amount in taxes and attorney fees. For this reason, it is vital that you speak with us to ensure your new acquisitions are properly transferred into the trust.
How to Make Changes to Your Living Trust
Making changes to your living trust can be done without having to go to court. However, there are multiple methods that can be used to modify a trust, so our estate planning attorneys can advise you on which is the best option for your situation.
There are three ways to change an existing living trust:
- Amendment. If you only have one or two changes to make, an amendment is likely the best choice. This is an additional document that outlines the changes you are making, and the rest of the trust remains unaffected. An amendment should include the name of the trust, the date, the change, and whether the change is an addition or whether it replaces something in the original trust. The amendment form should be attached to the original trust document.
- Restatement. Numerous amendments to your trust can make things confusing for your successor trustee. A restatement does not revoke the original trust, but allows it to be rewritten as a new document to reflect the changes (instead of attaching multiple amendments). The new document states that the original trust is still in place, but changes have been made to better reflect your current wishes.
- Revocation. Revocation may be used when you need to make significant changes to the original trust, or want to dissolve the trust completely and keep the property in your name. You will need to sign a revocation of the original trust, after which all property and assets will revert back to you. If you want to create a new trust, you will have to start at the beginning with original documents and go through the process of transferring property and assets into it.
It is worth noting that the property in your trust will be distributed immediately upon your passing, so it’s important to make any updates as soon as possible. Whether you already have a living trust or need to create a new one, our experienced legal team at The Law Firm of Kavesh, Minor & Otis, Inc. can help you achieve your goals and give your family peace of mind. Contact us today to get started!