A living trust is a tool individuals use as part of the estate planning process. The owner of the trust, or “grantor,” can revoke or change the trust instructions at any point in his or her lifetime. Living trusts have many benefits, such as avoiding probate, protecting privacy, and providing grantors greater flexibility and control. However, sometimes making changes to a living trust may be necessary.
For instance, changes in the law, personal circumstances, or family dynamics may necessitate trust modifications. Below, we explore the different types of living trusts, discuss some common reasons for changing a trust, and explain how to modify a living trust. For assistance with your own trust, reach out to TrustHandled to learn about our services regarding estate planning documents.
Types of Living Trusts
There are several living trusts. One important distinction is revocable versus irrevocable trusts. If you have an irrevocable trust, it can be much more difficult to modify, as this type is typically intended to be permanent and unchangeable. This is why most people who create a trust opt for revocable trusts, giving grantors greater flexibility and power. Some common types of living trusts include:
- Basic Living Trust: This is the simplest type of living trust that allows a grantor to transfer assets to the trust during their lifetime, and the trust becomes effective immediately. Basic living trusts can be revocable or irrevocable.
- AB Trust: Also known as a bypass or credit shelter trust, this is a popular choice for married couples. This type of trust allows each spouse to leave assets to the other while minimizing estate taxes.
- QTIP Trust: This trust allows a spouse to leave assets to their surviving spouse while controlling how the assets are distributed after the surviving spouse dies.
- Qualified Personal Residence Trust: This type of trust transfers a personal residence or property out of the grantor’s estate while allowing them to continue living there for a specific period.
- Special Needs Trust: This type of trust provides financial support for the needs of a beneficiary with a disability while maintaining their government benefits.
Reasons for Changes to Your Trust
You might need to modify your trust for several reasons. As your circumstances change, your estate planning goals may change as well. All relevant estate planning documentation must be adjusted to reflect these changes, including the information in a living trust. Here are some of the most common reasons why someone may need to change their living trust:
- Family changes. Births, deaths, marriages, divorce, and other family events can impact your estate plan. You may need to add or remove beneficiaries and trustees or reallocate assets to ensure they are distributed according to your wishes.
- Changes in your assets. If you acquire new assets or lose existing ones, you may need to update your trust to reflect these changes. For example, if you sell a property held in your living trust, you may need to remove it from your trust and distribute the proceeds to your beneficiaries.
- Shifting tax laws. Changes in federal or state tax laws can impact your estate planning strategy. You may seek to revise your living trust to take advantage of new tax laws or to minimize tax liabilities for your beneficiaries.
- Relocation. If you move to a different state, the relevant laws in your new jurisdiction may differ from the laws where you made the living trust. In this case, your trust may need to be updated to accommodate the laws in your new state of residence.
- Changes in your estate planning goals. Over time, your goals and priorities may shift. You may need to modify your trust to ensure your estate plan aligns with your current values and objectives.
How to Change a Living Trust Using a Trust Amendment Form
A trust amendment form is the most common way to modify a living trust. This legal document allows a grantor to make changes to their living trust without having to create a new one. The process of modifying a living trust via a trust amendment form is straightforward and typically involves the following steps:
- Review the trust agreement. Read over your trust document and determine which provisions need to be changed.
- Complete the trust amendment form. Obtain a trust amendment form and fill it out according to the changes you wish to be made.
- Sign the trust amendment form. You will need to sign and date the form, possibly in the presence of witnesses or a notary public depending on the laws in your state.
- Distribute copies of the trust amendment form. Make copies of your form and distribute them to all parties involved, including your trustee and beneficiaries.
- Store your documents. Keep all your documents together and store them safely, including a copy of the amended and original trust documents.
Restating a Trust
While using an amendment form is a common choice for those looking to update their living trusts, other options are available. Another way to change a living trust is to “restate” the trust. This involves creating a new trust document that outlines new or updated provisions from the original trust. Trust restatement is often preferable for those looking to make extensive changes to their trust. Restating a trust typically involves the following steps:
- Determine the new provisions. Review your existing trust and decide on the updated provisions. It is important to ensure that the proposed changes do not conflict with other trust provisions.
- Create a new trust document. Draft a new trust agreement that incorporates the desired changes. Include the name of the trust, the name of the grantor, and a clear statement of the modifications to be made.
- Execute the new trust document. For the changes to take effect, the new document must be signed and dated. Depending on your state, this may need to be done in the presence of witnesses or a notary public.
- Distribute and store copies of the new trust. Like with an amendment form, you must ensure your beneficiaries and trustee have copies of the updated trust. Also, save and store your copies in a safe place.
Use TrustHandled as a Platform to Generate the Trust Amendment Form Template
While considering your estate planning options, you may dread potential attorney’s fees and in-office meetings. But did you know that creating, changing, or restating a living trust can be almost entirely automated? This is where TrustHandled comes in. With our cutting-edge estate planning tools, you can access, fill out, and file all your estate planning documents from the comfort of your home. Our easy-to-follow guides can make the process efficient and smooth while sparing you the headache of dealing with lawyers. Sign up with a TrustHandled account today to get started!