Your life isn’t static, therefore your game plans for your assets, responsibilities and sense of legacy gifting isn’t static. And with shifting game plans, estate planning attorneys recommend that clients review their plans periodically to see if adjustments need to be made.
Can those adjustments include the terms of a trust? Can you remove property from your trust, pick a new trustee, or change the rules for distributions? Or are the terms set in stone once you sign on the dotted line? In California, the answer depends on the type of trust and the way the terms were written.
The type of trust most people use to avoid probate and simplify management is a revocable living trust. When a trust is revocable, it can be revoked, or canceled, so long as the person who created it remains legally competent. It can also be changed in any way, because you can revoke the terms and establish new terms.
You may designate a new successor trustee, for instance, or change the allocation of property between beneficiaries. While it is important to seek legal guidance before changing a revocable trust, it generally can be accomplished relatively easily as long as the trust creator is alive and has capacity. When the creator of the trust becomes incapacitated or passes away, then the terms become irrevocable.
Irrevocable trusts are set up to be strong to keep property safe from creditors, including the tax authorities. But the strength of irrevocable trusts also make them inflexible. Generally, once the creator of the trust transfers property into an irrevocable trust, they cannot change their mind and remove it. They also may not be able to change the terms established or individuals designated as beneficiaries or trustees.
However, when the law allows and when the attorney drafting the trust document has exercised skill and foresight, it is possible that the terms of the trust may allow some changes to be made. It may also be possible to get the court to approve amendment of a trust if the trust no longer serves a legal purpose or where the terms can be shown to work against the interests of the beneficiaries.
When a trust is set up through a will so that it will not take effect until the person who created the will passes away, then the terms of that trust remain potentially fluid during the creator’s lifetime. The person who created the will is legally allowed to change any terms in the will—including those creating the trust—at any time as long as they remain legally competent.
So, as long as the person who created the will, known as the testator, is still alive, there is the potential to change the trust. If the testator becomes incapacitated, then they will not have the legal capacity to make changes. Someone is said to be incapacitated when they are unable to make decisions or understand the decisions they are making.
If circumstances or goals have changed and you want to amend the terms of a trust, we invite you to contact the team at Blacksburg Law. We can review the situation and explain your options for moving forward.
It may be simple to establish additional terms or create a new document to replace the old one. Or the situation could be complex, in which case we can evaluate the requirements for an amendment of trust terms as well as other options for accomplishing your goals. To get started, just call Blacksburg Law at 415.909-3677 to schedule an appointment.
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