One of the most common additions to the average estate plan is a living trust. Living trusts can be used to help achieve a wide range of estate planning goals which is one reason they are so popular. What if you already have a living trust in your plan and you need to make a change to the trust? The Minot revocable living trust attorneys at German Law Group explain how to make changes to a living trust.
What Is a Living Trust?
A trust is a legal relationship wherein property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee appointed by the Settlor. 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, as the name implies, does activate during the Settlor’s lifetime.
Living trusts can be further broken down into revocable and irrevocable living trusts. If the trust is a revocable living trust 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.
What If I Need to Make Changes to My Living Trust?
Because a living trust can be revocable or irrevocable, the first question to ask if you want to make changes to your living trust is whether you can make changes to your trust. If you created a revocable living trust you have the ability, as the Settlor, to modify the trust at any time. If, however, you created an irrevocable living trust, you do not have the ability to modify the trust. In some cases, the beneficiaries of an irrevocable living trust may have the right to modify the trust, or you can petition a court for the right to modify or terminate the trust; however, as the Settlor of the trust you do not have the right to make changes yourself.
Options for Making Changes to Your Living Trust
Once you have determined that changes can be made to your trust, you will need to decide how you wish to go about making those changes. Changes can be made to a revocable living trust in one of the following ways:
- Amending the trust – 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 additional steps, such as including the Trustee’s signature on the amendment and/or signing the amendment in front of a notary.
- Creating a trust restatement – a trust restatement is best if you have more extensive changes to make and/or the trust has been amended several times 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. As is the case with an amendment, state law may impose additional requirements relating to the execution of the restatement.
- Revoking the trust and starting over – revoking a trust sounds much the same as restating a trust; however, there are important differences. Although the procedure is virtually identical, the language makes a huge difference. A restatement is almost always preferable to revoking a trust because when you revoke the trust, all assets held by the trust revert back to the original owner and must then be transferred back into the trust once again. Even though the trust assets are only technically out of the original trust for as long as it takes to sign the new trust agreement, the fact that they were legally removed at all can have unintended tax consequences that can almost always be avoided by using a restatement instead of revocation.
Contact North Dakota Living Trust Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about making changes to a living trust, contact the living trust attorney at German Law Group by calling 701-738-0060 to schedule an appointment.