Our “Ask a Question” mailbag addresses a question about Amending a Revocable Trust. “Is amending a Revocable Trust difficult? How do I go about amending a Revocable Trust I formed in 1998, as I have some necessary updates?”
Amending a Revocable Trust, in Most Cases, is Simple.
Revocable Trusts formed during your lifetime are typically designed to be easily “revoked” or modified. Because a Revocable Trust is meant to replace your Will, it should take into consideration the fact that life brings change. Over time you may wish to alter your preferences.
I would need to see your Revocable Trust to point out the clause, but there should be a paragraph that states the trust is revocable in full, at that you are free to make amendments.
Amending A Revocable Trust Should be Done Carefully.
Granted that it might be easy to change your trust, but do so carefully. Modifying the trust is like changing your Will. If you make a mistake or are unclear, you could unintentionally void a gift, create litigation or create a taxable event. Further, you must use the correct language to show that your Amendment does not completely void the remainder of the Trust. I have seen people try to amend a Revocable Trust by adding a gift, but they instead modified the trust so that only the single gift existed. As a result, all the rest of the assets then passed under the rules of intestacy. A terrible result!
If Equality is Your Wish, Be Careful About Taxes.
Your death may trigger many different types of taxes. Take into consideration all Income Taxes, Capital Gains Taxes, Inheritance Taxes, Estate Taxes, and others that affect your estate. If you fail to consider all taxes, you may unwittingly create an uneven division of your assets. For example, if you live in a state with an Inheritance or Estate Tax and give a particular gift to one child and the residue to another, the child receiving the residue might be burdened with the tax due on both gifts. Care must be taken to maintain your wishes.
Consider Your Incapacity (Not Just Your Death).
Most Revocable Trusts focus only on what happens after you die. Instead, think what would happen if you had a stroke, suffered from Alzheimer’s or some other disease. If so, you no longer could manage the Revocable Trust. Who would step in? Indeed, plan for your potential incapacity! If your Revocable Trust only names a successor trustee, that trustee cannot take over without proof of your incapacity. As a consequence, what could have been a smooth transition could evolve into an expensive court hearing. Instead, consider other alternatives such as naming a current co-trustee. Other options exist, depending on your specific situation.
Amending a Revocable Trust; We Can Help!
In conclusion, I exclusively focus my practice on estate planning, and I am happy to review your existing Revocable Trust. Moreover, I am glad to walk you through your estate planning options over the phone or in person. We try to make it easy! Please feel free to Contact our office for a free consultation.
Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!
Peter Klenk, Esq., LL.M.