Planning for the financial future of children, friends and loved ones can never begin too early. Yet circumstances change as time goes on, sometimes rendering those best-laid plans ineffective or obsolete. How to make preemptive preparations and be adaptable to altered realities at the same time isn't an impossible task.
One feature of a living trust is that it can be made revocable or irrevocable. Going the revocable route makes amending a trust somewhat easier than the other option. While using an attorney is advisable, it is not always necessary.
Revocable vs. Irrevocable Trusts
A living trust is formed when one party, referred to as the trustor or grantor, places assets into the legal trust entity and conveys delegated authority and management capacity over those assets to a trustee. The trustee acts on behalf of the grantor's beneficiaries.
The trust is said to be revocable when the trustor allows for changes. The trustor receives all the income gained from the trust prior to their death and it's distributed among the named beneficiaries after death. The grantor can revise the trust, provide updates, add or remove assets or dissolve the trust altogether during their lifetime. They can even act as the trustee. The trust converts to being irrevocable upon the trustor's demise.
An irrevocable trust is much less flexible, just as the name suggests. Only extraordinary measures can lead to any amendments in its terms once it's established. The difficulty is largely determined by the state where the trust is created. People often opt for irrevocable living trusts for their tax benefits and legal protections. Their downside is the difficulty with which they can be modified. All parties, including the beneficiaries, must approve of any alterations. More often than not, court hearings are required for an irrevocable trust to be restructured.
How to Amend a Living Trust
Amending a trust is as easy or difficult as the originator allows it to be. The simplest way to change a revocable trust lies in its description. The grantor can simply revoke the document and restate the trust with a new one. Alternatively, the grantor and trustee can execute an amendment and attach it to the original trust document. This is possible with no attorney involved.
The irrevocable trust may not be ironclad, but it's close. But more states are making pathways for the modification of irrevocable living trusts over the last quarter-century, according to representatives of the American College of Trust and Estate Counsel. In some states, decanting – a process in which the trustee is permitted to make revisions on behalf of the beneficiaries – is permitted within specific parameters. Likewise, there are states where courts have limited powers to revise living trusts if the objectives, such as tax favorability, aren't being realized.
The trustor can't change an irrevocable living trust in any jurisdiction.
Can I Change My Trust Without an Attorney?
The short answer is yes but this begs another question: Is doing so advisable? There are hazards in making adjustments without legal counsel. A trustee who decants may not understand the limitations on such authority per the trust agreement and state law. Any changes may bring unforeseen consequences that an experienced attorney would otherwise catch. One strategy to avoid such problems is to consult a lawyer to advise on all the options available to the grantor, trustee and beneficiaries of a living trust.
- Create a codicil to your will that takes account of the assets placed in the living trust, to avoid legal disputes after you die and prevent trust assets from going through probate.
- Understand that if you comingle your assets with trust assets, by keeping trust funds and your own funds in the same bank account, for example, a court may view the trust as a sham. In this case, trust assets might have to go through probate after you die.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.