Thinking about Making Changes to Your Trust?: Deciding Between Amending and Restating

Are you thinking about making some changes to your Trust? When you want to make a change to your Revocable Living Trust (“Trust”), many clients ask whether they can simply amend the Trust or whether the entire Trust needs to be restated. Simply amending sounds easier, right? But, here are a couple things you should know.

Generally, if the change to the Trust is a minor change such as changing a successor trustee or adding additional language to clarify an ambiguity in the document, an amendment to the Trust is going to fine. Go for it!

However, if there have already been several amendments and the Trust is becoming difficult to read because of the layers of amendments, then a restatement of the Trust is preferred to avoid any confusion.

But, more importantly, a restatement is also recommended when the change raises a sensitive issue.  For example, if you decide that you want to remove a beneficiary or change the distribution scheme, a restatement is going to be a better option.  You might ask why this is necessary when an amendment sounds easier.  This is because the law requires that all of the estate planning documents must be given to all beneficiaries when you pass away. If your Trust is only amended, all of the amendments, together with the original trust, must be available to all beneficiaries. So for example, lets say after careful consideration you decide you want to remove your friend, Sally, from your Trust.  If you only remove Sally from your Trust by amending you trust, when you die Sally will receive a copy of you original Trust (which includes her as a beneficiary) plus the amending document in which you removed her from your Trust. (Awkward!) However, if the Trust is restated rather than amended, the restated Trust supersedes the prior trust and any amendments.  Therefore under this restated Trust, Sally will not receive any of your Trust documents since she is not included anywhere in your new restated Trust. 

The good news is that restating your Trust is simple and does not require your new restated Trust be funded again (ie you don’t need to record new trust transfer deeds for real property, change any bank accounts or other assets that are already in the Trust).  This is because the restated Trust can have the same name and date as your original Trust. Since the name and date of the restated Trust will be same as the original Trust, so you won’t need to fund your Trust again.

So what’s the point? If you have a Trust, you should review it every so often to make sure it still says what you want. If you decide you want to remove Sally or make another sensitive change, you should consider restating the Trust rather amending to correctly reflect your wishes.  If you would like me to review your Trust, I see people every day for a FREE 30 minute consultation in Walnut Creek and Brentwood. 

    This article provides only general legal information, and not specific legal advice.  Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680   1600 S. Main Street, Suite 100, Walnut Creek, CA94513     © 2016 Joan Grimes

Should 401k and IRA Plans be Put in a Revocable Living Trust?

A common question people ask when they come in to do an Estate Plan is whether their retirement benefits i.e. the 401K, IRA or pension account should be in a Revocable Living Trust (“RLT”). As you may recall, a RLT is a legal document created during your lifetime that allows you to leave your real and personal property to beneficiaries of your choice. A RLT is very much like a Will with one BIG exception: there is no Probate with a RLT.   

The most common asset put into a RLT is real property. By putting real estate into a RLT there is no probate and minimal time delay incurred in transferring assets to beneficiaries with a RLT because no court approval is required.     

The question is more complicated when it comes to having an estate plan that calls for the RLTs to be a beneficiary of retirement accounts. The first question we ask is whether there is a strong estate planning reason to name a trust as a beneficiary, or is there a way to achieve the same planning goals without incurring the risks and complications of naming a trust?

Our first choice in drafting most estate plans will be for you to leave your retirement benefits i.e. your pension, 401K and IRA outright to your intended beneficiary. In most cases, this will be your spouse. However, what should you do if your spouse is not alive and you want to leave your benefits to minor children or to several beneficiaries?

If you want to leave retirement benefits to minor children or you want to leave to them to several people, these are compelling reasons why a RLT should be the beneficiary or a contingent beneficiary.  If you name a beneficiary who does not have capacity to receive the benefits i.e. a minor child, then a conservatorship will be established by the court at great expense to the minor child.

If you have retirement benefits and are considering making a RLT a beneficiary, you will need to check with your retirement benefit administrator regarding naming a RLT as your beneficiary. Different companies have different rules. Sometimes they require an attorney drafted designation. Also, it is critical that your beneficiary designation is correct and reflect your intentions. Who you put on the designation is the person who gets the money. They have no obligation to share with anyone else. 

If you are considering leaving retirement benefits in a RLT, the beneficiary of the trust must be a person or group of people. You can’t use a trust to leave retirement benefits to a charity, your church or another trust or any other entity. That is not to say that other assets of your trust cannot go to a charity or church or another entity, just not the retirement benefits. 

Today retirement benefits are very valuable. Take the time to understand what your current estate plan for the benefits is and what other options are available to you and your family.  For most people, an Estate Plan including a RLT and all of the ancillary documents including a Power of Attorney and Healthcare Directive should not cost more than $2,000-2,500. Most attorneys allow people to make payments over time for the work. If you have separate property from a prior marriage, business interests that need to be included or a taxable estate, it may be more, but then it is even more important that you properly plan for distribution of your assets in accordance with your wishes without the prying eyes of the public and court system. 

I see people every day for a FREE 30 minute consultation in Walnut Creek and Brentwood.

This article provides only general legal information, and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680 1600 S. Main Street, Suite 100, Walnut Creek, CA 94513  © 2015 Joan Grimes