As General Patton once famously said, “A good plan today is better than a perfect plan tomorrow.” In the context of estate planning, most clients understand this adage and create an estate plan even if they are not 100% sure of their wishes. They know that it is important to avoid procrastination and that they may always change their estate plan in the future should they later develop a better idea of their wishes.
Living trusts are central to most estate plans. In California, a trust is presumed to be revocable unless it states otherwise. However, even if a trust is revocable, it is important to follow the proper procedure for modifying it in order to make the changes effective.
If the trust dictates a specific procedure for making modifications, that procedure controls. Absent a specific procedure, a trust must be amended by a separate writing clearly stating the changes, signed by the trustmaker, and delivered to the trustee.
Some individuals think that it would be easier and less expensive to simply cross out provisions of the trust and write in their changes. Others try to type something themselves, often overlooking the specific procedure or the various nuances of the trust instrument that render the attempted change void. Once, I even saw a client attempt to make modifications by scotch taping updated typed clauses over the existing trust document – literally a “cut and paste!”
While these “do-it-yourself” methods of modification might seem easy and straightforward, it is important to spend the time, effort, and fee to have a qualified attorney prepare your modification in order to ensure its efficacy.
A modification might consist of a simple amendment if there are only one or two details of the trust that the trustmaker wishes to change, such as the addition or subtraction of successor trustees or a change in the amount that a beneficiary receives. This would be akin to “changing sparkplugs.” However, if the trustmaker wants to make structural changes to a trust, or if the trustmaker has many details that he or she would like to change, the trustmaker likely would be better served by creating a “restatement,” an amendment that changes the trust in its entirety – in other words, a “full body restoration.”
Many married couples have an “A/B trust” which means that the trust is wholly revocable while both spouses are living. However, when the first spouse passes away, part of the trust becomes irrevocable, unless the surviving spouse is given a “power of appointment.” Occasionally, the surviving spouse mistakenly assumes that he or she is able to make changes to the entire trust after the death of the first spouse. If the surviving spouse attempts to make such a change without the aid of a qualified attorney, the surviving spouse might never realize that his or her changes were not effective. The good news is that even irrevocable trusts may be modified under certain circumstances.
In my next blog, I will discuss the various methods of modifying irrevocable trusts.