Many people opt to include revocable living trusts as part of their estate plan. They have many benefits, including probate avoidance, ease of administration when you become incapacitated or die, protection for surviving spouses and children, and privacy. But another plus is that they can be changed whenever you want!
Changing the terms of a revocable trust agreement is known as “amending” the trust. The document you’ll execute will generally be titled something like “First Amendment to the Smith Family Trust,” and may be as little as one or two pages long. An amendment is generally appropriate when you’re only making one or two minor changes to your trust – perhaps changing your successor trustees, or adding a beneficiary. The amendment acts as a patch to your trust; the trustees and beneficiaries must read the original trust agreement, and then understand how the changes made in the amendment affect the original trust agreement. Both documents must be kept as long as the trust is in effect.
But if you want to make more extensive changes to your trust – such as changing the way beneficiaries receive their inheritance, removing beneficiaries, adding a corporate trustee, and changing what state law guides the trust, “restating” your trust may be more appropriate. A restatement is essentially a complete amendment of your trust. Basically, you’re keeping the framework – the trust’s name, original date, and original Grantors (trustmakers) – but ripping out the guts and re-writing the trust the way you want it now. The document you’ll execute will generally be titled something like “Restatement of the Smith Family Trust,” and will be many pages long (if you have a good trust). The old trust agreement is discarded and completely replaced with the restatement.
If you’ve accumulated a collection of amendments to your trust, there’s a very good chance your trust won’t do what you think it’ll do when you die. If you think of each amendment as a patch, each patch provides an opportunity for your trust to “leak,” or result in ambiguity (confusion). Ambiguity and confusion leads to arguments and lawyers. Or, perhaps you wouldn’t like your children or grandchildren to see all the changes you made to their inheritances over the years. At your death, your beneficiaries are entitled to a copy of your trust and all amendments. A restatement can solve those problems because now there’s just one recent document to read and understand – not two or more spanning decades of changes.
What about cost? As usual, that varies. Amendments are usually very customized and require actual typing from scratch, so they’re very time-consuming. Time = $$$ in the legal world. Restatements can be drafted fairly quickly and easily with specialized legal software – especially if the attorney drafted the original trust with that same software. So, like most estate planning work, the cost will likely depend on your situation.
But now, when you’re ready to make some changes to your revocable living trust, you’ll have a better idea of what your estate planning attorney is talking about when he or she discusses amendments and restatements.