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 Grand Forks trust lawyers at German Law explain how you can make changes to a trust agreement in case you find yourself at that point.
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 Testator’s Last Will and Testament and, therefore, do not become active during the lifetime of the Testator. Conversely, a living trust, activates during the Testator’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 Testator 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 Testator 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 Testator. 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 Our Grand Forks Trust Lawyers
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about making changes to a trust, contact the Grand Forks trust lawyers at German Law by calling 701-738-0060 to schedule an appointment.
John grew up on a small livestock farm in west central Minnesota. He now lives in Grand Forks with his wife Maggie and their two daughters. In his free time John enjoys reading, taking his family to North Dakota and Minnesota state parks and rooting for all UND and Minnesota professional sports.
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