Living trusts are an increasingly popular estate planning tool because they allow for both control and flexibility: the creator (also called settlor or grantor) of the trust can use and control trust assets just as if they were in his or her own name during life; after death, assets in the trust pass seamlessly to named beneficiaries under the guidance of a successor trustee. An attractive feature of living trusts for many people is that assets in a trust do not need to go through the probate process. Another advantage of living trusts is the ability to change, or even revoke them, if the settlor wishes. Here's what you should know about revoking or amending a living trust.
Any major life event should prompt you to at least review your estate plan, and possibly to update it. Such events include marriage, divorce, the death of a spouse, and the birth or adoption of a child or grandchild, among others.
If you find your trust is no longer adequate for your needs, the question becomes: do you amend or revoke it? Unless your original purpose for creating the trust no longer exists, an amendment is probably preferable.
The way in which you can make changes to a revocable living trust are governed by both Ohio law and the trust instrument itself, which is effectively the "private law" of the trust. Under Ohio law, unless the trust instrument provides otherwise, any living trust can be amended or revoked.
If there is more than one settlor (as would be the case with a trust created by a married couple) either one, acting alone, can revoke the trust. However, to the extent the trust contains community property and is to be amended rather than revoked, both settlors must act jointly to amend the trust.
As to the mechanics of amending or revoking a trust, the trust instrument should dictate what needs to be done. Let's consider revocation and amendment separately.
Before revoking a trust, a settlor who is also acting as trustee may wish to "de-fund" the trust by transferring assets in the name of the trust back into his or her own name; it's the opposite of funding a trust. (If there are assets remaining in the trust at the time of revocation, the trustee is obligated to deliver them as directed by the settlor when the trust is revoked.) Then, he or she would want to follow the dictates of the trust instrument as to how, specifically, to revoke or amend.
For instance, the trust instrument might provide that the trust can be revoked or amended by a writing to that effect, signed by the settlor(s) and delivered to the trustee. Ohio law does not require that revocations and amendments of trusts be notarized. The law does say that a revocation or amendment is effective if it "substantially complies" with the trust instrument's requirements. Rather than rely on an assumption that one has substantially complied, it is best to understand and to follow the rules established when the trust was created.
If the trust instrument does not state an acceptable method of revoking the trust, the law states that any method "manifesting clear and convincing evidence of the settlor's intent" will do. The only stated exception to this is that a revocable trust may not be revoked or amended by a will or codicil, unless the trust instrument specifically permits this.
The laws governing amendment of a living trust are the same as those governing revocation, but there are a few other details to consider. For instance, when a trust is amended, how does one make it clear that the amended trust instrument, and not the original trust instrument, governs? It may be best to work with an experienced trust attorney to make sure that your amendment is effective and is communicated to all parties who need to be aware of it.
An attorney can help you understand the effects of amending certain provisions and to do so in such a way that your amendment will not cause unintended consequences. An attorney will also help make sure that the amendment is communicated to all relevant parties. Under Ohio law, a trustee who is unaware that a trust has been revoked or amended is not liable for distributions or other actions taken on the assumption that the trust continued in its original form.
Amendments should, ideally, be signed and notarized, reference the original trust instrument, and be physically attached to it. If you find that you are making multiple amendments over time, it could be cumbersome for a trustee to keep track of which provisions have been altered. At that point, you should consult with your attorney about the pros and cons of revoking the original trust and creating a new one that is consistent with your current planning goals.
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