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 Hauppauge trust lawyers at the Law Offices of Kobrick & Moccia explain how you modify a trust in case you find yourself at that point.
Understanding Your Trust
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor, who transfers property to a Trustee. 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 activates during the Settlor’s lifetime.
Is Your Trust Revocable or Irrevocable?
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.
Consequently, if you created a revocable living trust you have the ability, as the Settlor, to modify the trust at any time.
Options for Modifying 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 back to the original owner and must then be transferred back into the trust once again. Doing this can have a number of unwanted ramifications, including tax consequences.
Always consult with an experienced trust attorney before attempting to modify a trust to ensure that the trust can be modified and what steps are required to effectuate the desired changes.
Contact Hauppauge Trust Lawyers
Please feel free to download our FREE estate planning worksheet. If you have questions or concerns about modifying a trust, contact the New York trust lawyers at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.