So when does it make sense to amend, restate or revoke a trust and start over? Let us examine these alternatives.
A trust is amended when the settlor wishes to make revisions to particular terms within a trust. Each amendment is an overlay to each preceding one and to the original trust itself.
Naturally the more numerous amendments the more cumbersome reading and understanding the trust becomes.
Reasons to amend a trust include changing who becomes successor trustee or the distribution scheme.
Sometimes entirely restating the trust is desirable. A restatement is an amendment that completely rewrites the whole trust. It preserves the trust’s existence but with entirely new terms.
A restatement is desirable when a trust might have numerous inadequacies that require substantial corrections. Also, amending a trust with many prior overlapping amendments may require a restatement.
An advantage of the restatement is that trust assets do not have to be retitled in the name of a new trust. When many trust assets are involved a restatement can save time and money.
But sometimes it is necessary to revoke a trust and to transfer the assets into a new trust. Let us now see why.
Four reasons come to mind why a settlor might want a new trust rather than a restatement.
First, the settlor may not wish for the trust beneficiaries to receive copies of the prior amendments to the trust.
As a matter of law, when a settlor dies, the beneficiaries and heirs of the deceased settlor are all entitled to a copy of the original trust together with all amendments. This may be disagreeable to any settlor who prefers to keep the earlier amendments secret.
Second, the settlor may not wish to leave open the possibility that the most recent amendment (which might even be a complete restatement) could be destroyed by a dissatisfied beneficiary.
That is, someone might wish to discard the most current amendment in order to proceed under an earlier version of the trust. Titling assets over into a new trust with a new name and creation date cuts-off that possibility.
Third, with a joint trust (i.e., one settled by a married couple) the surviving spouse might decide to transfer her share into a new trust in the survivor’s name alone.
Although the surviving spouse can typically use a power of appointment to change who inherits what assets, the surviving spouse may or may not be able to make amendments to the provisions of the trust after the first spouse dies.
In the case of a blended family, the surviving spouse may wish to remove her assets from a joint trust into a new trust for the benefit of her own children to the exclusion of the step children.
Fourth, when the community property and separate property rights of one spouse in a joint trust assets are transmuted (changed) into the other spouse’s sole and separate property the trust is terminated and assets transferred into a single settlor trust.
This happens when assets are transferred between spouses in order to allow one spouse to qualify to receive Medi-Cal at a skilled nursing facility.
Amending or restating the original joint trust in that case is not a solution.
As discussed, the revocable living trust is flexible. Options to amend, restate or revoke are available.
Reviewing one’s estate plan every five years, sometimes sooner if circumstances necessitate, with a qualified attorney is a generally advisable.
Dennis A. Fordham, attorney (LL.M. tax studies), is a State Bar Certified Specialist in Estate Planning, Probate and Trust Law. His office is at 55 First St., Lakeport, California. Dennis can be reached by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 707-263-3235. Visit his Web site at www.dennisfordhamlaw.com.
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