Some trusts can be modified or terminated, others can’t – it depends on the terms of the trust and whether the trust is “revocable.”
To set up a trust, a “settlor” (sometimes called a “grantor”) creates a trust document. The trust document names a trustee and beneficiaries and also states the purpose and terms of the trust. The settlor then transfers property into the trust, and the trustee takes care of (or distributes) the property according to the terms of the document.
Trust can be revocable or irrevocable.
Two common trust categories are “living trusts” and “testamentary trusts.” Here are some details about modifying or terminating these trusts.
Living trusts are usually created to avoid probate and they are almost always revocable. So the settlor of a living trust usually has the power to change or terminate the trust. Indeed, the power to change or terminate the trust is one of the benefits of this type of trust. Settlors usually make a living trust to keep control of trust property during their lives, and to avoid probate when they die.
If you have just small changes to make to your living trust, it usually makes sense to add an amendment or to restate the trust, rather than revoking it and writing a new one. This is because making a new trust requires you to transfer all trust property to the new trust and this can be a substantial amount of work. Amending the trust involves adding a page to the trust that describes the changes. Amending a trust is sufficient for very small and simple changes, like changing the name of a trustee or beneficiary. For more substantial changes, restating the trust is usually better because you “restate” the entire trust, including the changes, so there is less room for ambiguity. However, for truly substantial changes, you may need to revoke your old trust and write a new one.
Revocations, amendments, and restatements must be in writing, signed by the settlor, and acknowledged by a notary public.
Generally, a living trust cannot be changed or revoked after the death of the settlor.
A testamentary trust is a trust that is created when the settlor dies. For example, when a will maker includes a trust as part of a will, the trust doesn't take effect until the will maker dies. This type of testamentary trust is often used to set up trusts for minors, so that someone is named to help manage a child's inheritance.
If you include a testamentary trust in your will, you can modify it or revoke it at any time, but after you die it becomes irrevocable. The trustee or beneficiaries may be able to modify the trust after your death, but under limited circumstances – for example, if the trust cannot achieve its intended purpose. This sometimes happens when the amount of money in the trust is different than expected or when the beneficiary’s needs change.
A testamentary trust usually states when it will end – for example, when the beneficiary reaches a certain age or when a specific purpose is achieved.
All trusts terminate when their funds are depleted or if their purposes become unattainable.
You may not need an attorney to modify or revoke your living trust, but if you have questions -- or if you want to modify or terminate an irrevocable trust -- see a trust lawyer for help.
