Once your estate plan moves beyond the basics, there is a good chance you will decide to incorporate a trust into your overall plan to help achieve one of your many estate planning goals. You may, however, decide you need to make changes to your trust agreement at some point down the road. The Essex Junction trust attorneys at Unsworth LaPlante, PLLC explain when and how you can modify a trust agreement.
Trust Fundamentals
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, activates during the Settlor’s lifetime.
Can You Modify Your Trust?
The type of trust you create will directly impact your ability to modify the trust. Living trusts can be sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, 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. It may be possible to modify or terminate an irrevocable living trust by agreement of the beneficiaries and/or by court order, but never by the Settlor. Testamentary trusts are always revocable.
Consequently, if you created a revocable living trust or a testamentary trust you have the ability, as the Settlor, to modify the trust at any time. If, however, you created an irrevocable living trust, you cannot modify the trust. The terms of the trust will dictate whether the trust beneficiaries are able to do so or not; however, under no terms may you modify the trust. If the beneficiaries cannot modify the trust, you will need to petition a court for the right to modify or terminate the trust.
How to Modify Your Trust
If the trust you created can be modified by you, there are three ways in which you can accomplish your goal of making changes to an existing trust, including:
- Trust Amendment. 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 you to sign the amendment in front of a notary and/or include the Trustee’s signature on the amendment.
- Trust Restatement. A trust restatement is best if you have more extensive changes to make and/or the trust has been amended 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, simply restating it. Like an amendment, you may need to execute the restatement in front of a notary and the Trustee may also need to sign the restatement.
- Trust Revocation. You always have the option to revoke the original trust agreement and draft a new one. In fact, many people wonder why they should go to the trouble of “restating” the original trust if it requires them to rewrite the entire trust agreement. The reason why a restatement is almost always preferable to revoking a trust is that when you revoke the trust, all assets held by the trust revert to the original owner and must then be transferred back into the trust once again. Doing this can have several unwanted ramifications, including tax consequences.
Contact Essex Junction Trust Attorneys
For more information, please attend one of our upcoming FREE webinars. If you have additional questions or concerns related to the need for a successor Trustee, contact the experienced Essex Junction trust attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.
Wendy now works with clients on estate plans, including Trusts, Wills, Powers of Attorney, and Advanced Directives.Wendy also assists clients with Medicaid Planning and helps clients to qualify for Medicaid assistance.Wendy is a member of the Vermont Bar Association and both the national and Vermont chapter of the National Academy of Elder Law Attorneys.
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