What does it mean to modify, amend, or revoke a trust?
To revoke means to annul by recalling or taking back something. To modify means to make changes to something in an effort to improve it. To amend a document is to make minor changes to make it more fair, accurate, or current.
Can a revocable trust be modified, amended, or revoked?
By its very nature, a revocable trust can generally be revoked, amended, and modified by the grantor (aka settlor, trust or). This, so long as the grantor is alive and not incapacitated. And provided the trust instrument permits the grantor to make such changes. However, once the grantor passes away, the trust becomes irrevocable.
A grantor can revoke a trust that she created in whole or in part. She can totally restate and amend the trust, remove or replace her trustees, and remove any beneficiary under certain conditions. In addition, the grantor can amend her revocable trust in any way she chooses, with some exceptions. While a revocable trust may be modified, amended, or even revoked, there will likely be tax implications to making certain changes. Therefore, before making changes to a revocable trust, a lawyer should be consulted.
When might a grantor want to amend a trust?
It is recommended that anytime a triggering event occurs, a grantor might consider having a conversation with an attorney. Examples of triggering events are: when a new child enters the family, when a child gets married, when a child reaches a certain age, when a family member becomes disabled, when a pet joins the family, when the grantor gets a divorce, remarries, relocates, purchases a new piece of property, wants to change the trustee, executor, agent for healthcare, agent for finance, just to name a few events.
Can an irrevocable trust be modified?
Under certain circumstances, an irrevocable trust may be decanted. What is decanting?
By way of illustration, think of wine. The decanting of wine occurs by separating the good wine from the sediment, which remains at the bottom. The good wine is poured into a new bottle and the sediment remains in the original bottle.
For years, trusts and estates practitioners have tried to find a way to amend irrevocable trusts. By their very nature, an irrevocable trust cannot be revoked. Until the concept of decanting was applied to the law. Courtesy of common law and a number of state statutes, decanting permits the amending of irrevocable trusts under certain conditions. To decant a trust means to distribute the assets from one trust into a new trust, leaving the unwanted terms in the original trust.
Different jurisdictions have different rules and not all have favorable terms. More than thirty states have decanting laws. Most of those states require that the beneficiary be notified before an irrevocable trust can be amended. Among those states with more stringent notice requirements are California, Texas, Florida, and New York. A few states that don’t impose a requirement to notify beneficiaries are Nevada, Tennessee, South Dakota, and Wyoming.
Take Aways:
- If you have an irrevocable trust and you want to amend it, there are legal ways or make that happen.
- Over thirty states have decanting laws, but not all state laws incorporate the same language. Some are more flexible than others and some impose greater restrictions.
- Know your state law before attempting to decant an irrevocable trust AND use a lawyer.
- Make sure you understand the implication of each provision in your trust. Read it carefully, don’t just sign off on it.
Francine D. Ward
Attorney-At-Law, Author, Speaker
Follow Francine:
Don’t miss Francine’s Latest Blogs:
- Common Contract MistakeCommon Contract Mistake #1. Not Having Written Agreements with EVERYONE You Do Business With. Common contract mistake. Without question, the most common contract mistake is not having the terms of… Read more: Common Contract Mistake
- AI and PatentsAI and Patents. Understanding Patent Law in the Age of AI. Patents, along with Copyrights, Trademarks, Trade Secrets, and Rights of Publicity, are one of the five areas of practice… Read more: AI and Patents
- Effective Goal SettingSetting Goals. It’s that time of year, time to plan for effective goal setting. A time when some of us start thinking about goals for the upcoming year. If you… Read more: Effective Goal Setting
- Indemnify AI UseBeware of companies that say they will indemnify AI use, that they will pay ALL the legal costs incurred by customers using Generative AI services (like ChatGPT, CoPilot, or Bard).… Read more: Indemnify AI Use
- Trademark A NameHow to Trademark a Name A trademark can be a word, phrase, design, logo, color, sound, or a combination of those things that identifies the source of a product or… Read more: Trademark A Name
