When Changes Happen–When and How to Amend Your Trust the RIGHT Way

November 18, 2014 - Posted by: admin - In category:

taxes - No Responses

Life is full of changes–some for good, some not so good. When the time comes to make corresponding changes to your estate plan, including your trust agreement, get help so that it is done right and your estate plan remains consistent with your desired objectives.

We previously looked at adding assets to and taking assets out of your trust.  We noted there that most of the time it is NOT necessary to make changes to the trust agreement simply to add or remove assets from a trust estate. However, other events, other changes, do normally require changes to the trust agreement.  What type of changes fit into this category? Great question—thanks for asking!

It is quite common for a person to sign a trust agreement, have all of the relevant asset “funded” into such trust and otherwise have all related details current and accurate…only to have the passage of time, along with related life events necessitate updates to such personal estate plan generally, including said person’s trust agreement.  For example, let’s assume that 10 years have passed since the execution of a revocable living trust and the maker of such trust (typically known as a trustor or grantor) has changed his or her mind about: (a) WHO should be in charge of the trust management following such trust-maker’s death or disability; and (b) WHAT persons and/or charities should receive a portion of such person’s trust estate and WHEN such distributions should be made.  These types of “WHO”, “WHAT” and “WHEN” changes, all of which are very natural and common because of the passage of time, will most often lead to the strong recommendation, if not absolute necessity, that the applicable trust agreement should be updated to properly incorporate such changes.  So now that we know when a trust amendment is needed, how do we go about doing that?  Again, great question!

Given that this blog post is written by an attorney, you will not be shocked to hear that the answer to the “how” question is that you would be well-advised to contact a knowledgeable estate planning attorney to help with any and all amendments to your trust agreement. Why is this not a “do it yourself” matter? The simple answer is that even though you are very smart, very careful and otherwise very talented, you are likely not familiar with applicable federal and state tax (and non-tax) laws and regulations that govern trusts and estates generally.  That is how it should be—this is a very specialized area of a specialized profession, so you should NOT be expected to have this knowledge and expertise.

By the same token, I don’t engage in “self-help” with such things as surgery, dentistry, fire-extinguishers, parachutes and nuclear reactors. Each of those are also very specialized in nature and, accordingly, I seek out the help of an appropriate specialist—this is how we live in our modern society. For the specialist, one who has the requisite knowledge, training and experience, surgery, dentistry, nuclear reactors and the like are relatively safe matters—whereas they are ANYTHING but safe for the untrained novice.  It is possible that someone untrained in those disciplines COULD “wing it” and such a person might in fact get lucky and things could work out just fine.  HOWEVER, there is also a VERY good chance that mistakes could be made during the course of such “self-help” and the consequences of such “self-help” could lead to VERY significant problems, damage and pain (not to mention significant clean-up costs).

Perhaps you are thinking that those are overly dramatic examples—after all, here we are “only” talking about the world of trust and estate planning, right?  From my perspective, the examples used above are actually very appropriate, as I am routinely exposed to problems, damage and messes that were created by such “self-help” estate planning.  Sometimes it is possible to fix these problems with minimal pain and expense—but sometimes the fix is BOTH painful and expensive, and sometimes we CANNOT fix the mess (at least not a total fix), given the realities of what we are left with and the applicable laws and regulations by which we are bound.

To summarize, when the time comes to amend your trust agreement, you would be wise to get assistance from a competent estate planning attorney.  If you had a good experience with the attorney who wrote your trust agreement previously—feel free to use that same attorney for changes.  On the other hand, if you did not have a good experience previously, of if that attorney is no longer available, you are free to take your existing trust agreement to a different attorney (there is no umbilical cord from your existing trust to the attorney or law firm who wrote the documents originally).

If you elect not to retain an attorney to amend your trust agreement and you instead engage in “self-help” and do your own trust amendment work—it COULD work just fine and it MIGHT accomplish what you are seeking to accomplish.  On the other hand, you MIGHT create problems and messes that you or another person is required to clean up in the future.  Part of such clean up could be done by a judge, as part of a court proceeding that you could and should have avoided altogether.

The choice is yours.  Choose wisely.

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