A living trust can be used as a tool to avoid probate and dictate how your heirs and beneficiaries will receive your assets after passing away. But life brings significant changes, which may require amending your trust agreement to reflect your current wishes.
When should you make changes to your living trust? What alterations can you legally make? And how do you correctly amend the document?
Let’s walk through the amendment process step-by-step.
When The Time Comes to Update Your Revocable Trust
You probably don’t need to amend your trust for minor life events. However, significant changes my make revisions necessary.
Typical major events include:
- Marriage or divorce
- Birth or adoption of children or grandchildren
- A beneficiary passing away
- A person with an important role passing away (such as a trustee)
- Buying or selling real estate
- Buying or starting a business
- Selling or closing down a business
- Moving to another state
- Having a trust beneficiary with special needs
- Substantial changes in asset value
- Changes to your asset mix
Beyond significant life events, reviewing your trust every 2 to 3 years is wise. Ensure the trustees and successors you named are still willing and able to serve and that the transfer of property to the trust is still viable. Confirm your property listings are current. Verify the payout structure still matches your wishes. And ensure your trust accounts for any law changes that may affect it.
Consistent review of your asset alignment with your trust is also very important. If probate avoidance is important to you, aligning your assets with the trust plan is important to avoid assets going to probate. Depending on how often you change the assets you own, you may need to review asset alignment often, with or without an attorney, at least annually.
When we’re doing trust based estate planning, making things easy on the beneficiaries is usually one of the primary goals. Therefore, after a couple of amendments, restating the entire trust agreement is generally preferred to make sure the trust agreement is easy to read and comprehend for future trustees. But what precisely can you change without revoking the trust and creating an entirely new trust document?
Common Mistake in Making a Change to Your Trust
Every now and then, someone comes in to our office with a trust agreement that they have marked up on their own. Typically, the person has struck out certain portions, struck out clauses, written new clauses, struck out and written in new names, etc. Please don’t do this. If the trust is left like this without a proper amendment or restatement, it can create a mess for anyone that has to take over the administration of the trust. That person is going to be left in the position of having to figure out whether the handwritten changes are legally effective (that’s probably going to require a trip to court with potential litigation between the proponents and opponents of the handwritten changes).
Which Living Trust Amendments Can You Execute?
The beauty of a revocable living trust is flexibility. You can amend most provisions as long as you still serve as the settlor or co-settlor of the trust.
Areas commonly modified include:
Beneficiaries
You can add or remove beneficiaries at any time. You can also change the allocation percentages assigned to beneficiaries. For example, you’d likely want to remove an ex-spouse as a beneficiary after a divorce.
You can modify beneficiary designations for any reason, including:
- Removing Beneficiaries – for example, excluding an ex-spouse after divorce
- Adding Beneficiaries – such as naming a new grandchild later born
- Changing Percentages or Adjusting fractions – if your life situation evolves
Trustees or Successor Trustees
Depending on the terms of your trust, you may be able to change current and successor trustees whenever needed. For example, if your chosen backup trustee is no longer available, you’ll appoint a new successor trustee.
Serving as a trustee may involve some burden like:
- Managing the trust assets
- Keeping detailed records of activities
So, your appointed trustees must agree and be able to serve the trust.
Here’s how to modify yours:
- Replace current trustees
- Name a different person if needed
- Change successor trustees
- Designate new backups when your named fiduciary cannot serve
Revisit these choices whenever life changes undermine the capabilities of those you previously picked.
Assets and Property
Your living trust only controls the property formally transferred into it. It’s common to add or remove assets as your holdings change (we call that your asset mix).
Recall that your living trust only controls the property formally retitled in its name. It’s wise to transfer most of your valuable assets, including:
- Real estate
- Financial accounts
- Business interests
- Vehicles
- Valuables like jewelry
Not necessarily something that requires an amendment to the trust, but assets may need to be retitled (funded) over to the trust to keep your assets in alignment with the trust.
Distribution Instructions
You can alter ages, life events, or conditions that trigger distributions after your death.
For example:
- Grandkids finishing college sooner than expected
- A relative facing alcohol or drug addiction issues you want to protect
- Changes in tax laws impacting distribution optimal timing
Work with your Alabama estate planning attorney if your situation shifts regarding intended inheritance distribution, restrictions, or other triggering events.
State Law Provisions
Moving to another state or legal changes in your current state may impact trust validity. State law tweaks preserve alignment with statutes.
If you create a living trust in Alabama and then, say, later relocate to Florida, it’s generally a good idea to have an attorney in Florida to review the living trust.
Significant state law differences include:
- Community property laws
- Financial powers of attorney
- Wills and inheritance statutes
- Default provisions incorporated into the trust from state law
- Trustee duties and legal liability
You can either:
- Amend clauses to sync with the new state
- Re-form the trust under the laws of the new home state
It’s also possible for statutory changes in your current state to make parts of your trust outdated or unenforceable. Again, confer with legal counsel to amend terms back into compliance.
Walking Through the Trust Amendment Process
Amending your document doesn’t require starting totally from scratch. But you’ll still want to follow precise legal protocols to enact valid changes.
Step 1: Consult a Trust Attorney
Self-amendment is legally possible but not advisable in most cases. An experienced estate planning or trust attorney can help you with the following:
- Craft amendments matching your current goals
- Ensure what you want to change aligns with state laws
- Avoid adding accidental provisions or improper execution, inviting disputes later.
So, while do-it-yourself (DIY) trust amendment kits exist, professional support lends validity and prevents problems.
Step 2: Amendment Form Drafting
If hiring an estate planning lawyer to draft your amendments, he or she will create the required codicil documentation that can stand up in court.
Most amendment forms include:
- Modification terms and language stating the changes
- Updated property attachment schedule
- Certificate of trust accuracy
Step 3: Get Proper Signatures
Who needs to sign depends on your trust type:
- Revocable Living Trust – the settlors and trustees sign
- Irrevocable Living Trust – your attorney will review this on a case by case basis. Most irrevocable trusts are designed to make it very difficult to make changes
Also consider:
- Single-Party Trust – only one settlor signs
- Joint Married Trust – both spouses sign
Alabama requires the notarization of trust documents for legal validity.
File Updated Documents
Once signed, you must file and attach the amendment with your original trust document. That way, when someone reviews the trust, he or she can incorporate your changes precisely as you wish.
For extensive or complicated revisions, doing a complete restatement may make more sense. This task combines amendments into an updated singular document. It’s an amendment of the entire trust agreement. Restating simplifies the future execution of the trust agreement.
Consult Our Estate Planning Attorneys For Legally Sound Updates
Over the years, your trust will likely warrant amendments to sync your plan with evolving life circumstances. Attempt these changes only after giving careful thought and seeking legal counsel.
A seasoned Alabama estate planning attorney can ensure your amendments are legally sound and express your intent clearly rather than inviting conflict.
By methodically enacting modifications, your living trust will reflect how to protect and distribute your wealth clearly and per your values. And always remember to review your trust document terms often and amend them anytime major life events occur.
Contact the Law Offices of Brenton C. McWilliams for legal advice when you have questions about the living trust amendment process or need representation for more complex estate planning matters.
Our Alabama estate planning attorneys have years of experience assisting local families in thoughtfully updating trusts as their needs change.