The Complete Guide to Trust Modification and Termination
Trusts are becoming increasingly popular tools in estate planning. At some point in your life, there is a good chance you will be involved in a trust, whether by creating your own trust or as a trustee or beneficiary for someone else’s trust. It may become necessary to modify or terminate a trust. There are ways to modify or terminate a trust in California, but it may require court involvement. The laws related to trust modification and termination are complex, and one of the best things you can do is discuss your case with an experienced attorney.
Modifying an Irrevocable Living Trust
There are two main types of commonly used trusts — revocable and irrevocable trusts. A revocable trust can be modified or canceled by the settlor (the trust creator) at any time. Generally speaking, an irrevocable trust cannot be modified or terminated, hence the name ‘irrevocable.’ There are some exceptions to this rule, however. If the trust beneficiary agrees to modify the terms of the trust, you may be able to do so. You will need to show that the changes are in the best interest of all the beneficiaries.
To modify an irrevocable trust, you can either decant the trust or initiate a court procedure through a California probate court. With the latter, you will need to petition the court to allow the modification to the irrevocable trust. It is also possible to include a trust protector provision in an irrevocable trust. Doing so means that if you need to update an irrevocable trust, you can modify it without a court proceeding by the appointment of a trust protector who has the authority to update the trust.
Working with a skilled attorney when creating your trust agreement can save you money and time down the road. If you need to modify an irrevocable trust that has already been created, we recommend contacting our law firm as soon as possible to discuss your case with an attorney.
Modifying a Testamentary Trust
A testamentary trust is created when the settlor who created the trust dies. In a testamentary trust, the person creating a last will and testament will include the creation of a trust as part of the will. The trust will not come into effect until the person who created the will dies. Testamentary trusts are an effective way to create trusts for minor children. When a parent passes away, someone will be named as a trustee who will manage the child’s inheritance and make sure funds are available in the future.
If you have included a testamentary trust in your last will and testament, you can modify it or revoke it at any time. In other words, you can modify the terms of the testamentary trust during your lifetime or even completely remove the testamentary trust from your will. However, once you pass away, the testamentary trust will become irrevocable. It may be possible for the beneficiaries and trustees to modify a testamentary trust after your death, but only under limited circumstances.
Suppose the number of assets in the trust is not what was expected, or the beneficiary’s needs change. In these limited circumstances, you may be able to modify the trust. Testamentary trusts usually state when they will end or be terminated. In most cases, the trust will state that the trust will end when the beneficiary reaches a certain age or a specific purpose has been achieved.
Modifying a Living Trust
Living trusts are among the most popular types of estate planning documents. They can be used to avoid probate, and they are almost always revocable. The person who creates the living trust almost always has the power to modify the trust or terminate it during his or her lifetime. This type of flexibility is one of the key benefits of living trusts. Most people who create a living trust do so to control the trust property during their lifetimes, and so their beneficiaries can avoid probate after they die.
If you need to make small changes to your living trust, adding an amendment or restating the trust typically makes sense. Revoking the trust and writing a new one is an option, but it should be the last option. If you have to revoke a living trust and create a new one, it will require transferring all your trust property into the new trust, which can be a significant amount of work.
Amending a trust involves adding pages to the trust that describe all the changes that are happening. Amending a trust is sufficient for simple and small changes, like changing the name of a trustee or beneficiary. However, when you need to make substantial modifications, restating the trust may be a better option. There is less room for ambiguity when you restate the entire trust. Typically, a living trust cannot be modified or revoked after the trust’s creator passes away.
How to Terminate a Trust in California
At some point during the trust administration process, the trustee should wind up the process and terminate the trust. Terminating a trust requires careful attention to California probate laws and tax laws. Suppose you are a trustee who is responsible for terminating a trust. In that case, it is wise to seek guidance from an experienced probate attorney so you can protect yourself and the trust from any potential liability. You will have to follow several steps before you can terminate the trust legally in California.
Contact a Sacramento Trust Attorney Today
If you need to modify or revoke a trust in California, the experienced probate attorneys at the Law Office of Daniel Hunt are here to help. We will carefully review your case and advise you of all their legal options. Our trial-ready lawyers will skillfully represent you and your best interests. Contact the Law Office of Daniel Hunt today to schedule your free initial consultation.
Law Offices of Daniel A. Hunt
The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.