Why and when should you update your revocable trust?

A revocable trust, also known as a living trust, is often the central document of your estate plan. A revocable trust allows for the efficient passage of property according to your intentions. It can facilitate the handling of your assets during your lifetime in the event of incapacity and avoid the need for a probate court proceeding after death.

As its name suggests, a revocable trust can be revoked or amended throughout your lifetime. Changes in life circumstances and federal and state laws necessitate periodic reviews and updates to your trust to ensure it continues to reflect your wishes. A revocable trust offers you the flexibility to modify its terms during your lifetime so that your goals can be met even as circumstances change.

As your life progresses, you may find several different reasons to update your trust to ensure your assets transfer the way you intend.

When should you update your trust?

Most often the need for updates arises whenever there are significant life changes. These life changes could include marriage, divorce, the birth of a child or the death of a beneficiary. If your trust does not reflect your current family situation, assets may be distributed contrary to your intentions.

Other reasons to review your trust and potentially edit its provisions include:

• A change in financial status. This might include acquiring or selling real estate or other property, receiving an inheritance or experiencing a significant shift in wealth. New assets must be properly titled in the trust's name to ensure seamless management and distribution.
• Adjustments to beneficiaries or trustees. Relationships change over time, and you may wish to add or remove beneficiaries, assign new successor trustees or update instructions on asset distribution. Keeping these designations up to date ensures your trust functions as intended.
• Changes in state or federal laws. Tax, trust and estate laws are frequently revised or clarified. An outdated trust may not take advantage of new tax laws or asset protection. Periodic reviews with an estate planning attorney can help ensure compliance with the latest regulations.
• When you move to a different state. Tax, trust and estate planning laws vary by state. Moving to a new jurisdiction may require modifications of your trust to align with local legal requirements.

Should you restate or amend your trust?

Once you've identified the need for changes, you have two primary options, depending on the extent of the updates you want to make.

Amending your trust

When you amend your trust, you make minor changes while keeping the original trust agreement intact. Such modifications might include adding or removing beneficiaries, changing the trustee or making changes to specific asset distributions.

The process is relatively simple. Your estate attorney would draft a trust amendment that clearly specifies the changes to certain provisions within your existing revocable trust. Then, following relevant state legal requirements, you would execute the amendment, often by signing and notarizing the new amendment. It is important to store the amendment with the original trust document so that your heirs can easily identify your most recent trust provisions.

The benefits of utilizing an amendment include:

• It is a simple process that allows for several changes.
• It is generally cheaper than restating your entire trust agreement.

Restating your trust

When the changes you need to make to your original trust are more substantial or larger in number, it is advisable to compose a restatement of the trust agreement. A restatement retains the original trust name but recreates the terms and content of the agreement in its entirety.

Your estate attorney will rewrite the trust agreement to include your updated provisions. A restatement replaces the previous trust provisions while maintaining continuity of titling and date. The benefits include:

• It ensures clarity by consolidating all changes into a single document.
• It preserves the trust’s original establishment date, which may be advantageous for tax and legal purposes.
• It avoids the challenge of retaining and tracking several different amendments, which can be confusing for heirs.

Last resort: Revoking your trust

Revoking your trust means you terminate or dissolve the trust agreement in its entirety. Revocation of your trust may be necessary if you wish to transfer the assets from the revocable trust back into your own name. It could also be necessary if you wish to substantially restructure your estate plan or update the date of your asset transfer to a newly established trust.

Revoking your trust requires that you remove the assets from the trust and update the asset titling. Your attorney would draft a legal revocation of the trust agreement that you would execute according to state law. Once you have revoked your original trust, if you subsequently wish to employ a revocable trust strategy in your estate plan, a new trust agreement is needed. Revocation annuls your original trust agreement and allows you to start over with a new trust agreement.

Review your trust regularly

A revocable trust is a dynamic document that should evolve with your life circumstances and changes to the legal landscape. Regularly reviewing and updating your trust ensures that your assets are distributed according to your wishes.

Our advisors are always available to help you review your trusts and determine if changes are necessary to meet your goals. By keeping your trust up to date, you provide peace of mind for yourself and your loved ones by ensuring the smooth management of your assets during your lifetime and orderly transfer of your estate.