A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.
The son has numerous valid concerns about paying his parents’ bills, managing their assets and avoiding personal liability if they are sued. The author addresses these concerns for the son, but I’d like to focus on one point: updating and amending the trust.
All estate plans change over time as an individual’s needs and wishes change. Sometimes the trust will anticipate these changes, such as naming a successor trustee to take over when the trust creators can no longer make financial decisions. In the son’s case, that might be enough. However, if the trust doesn’t address the issue or if the trust makers’ needs and wishes change substantially, it is sometimes necessary to amend a trust. Sometimes it is good to amend a trust for tax reasons, such as Mary describes here: https://www.galliganmanning.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/
If his parents have a revocable or living trust and have the capacity to handle their financial affairs, they can choose to amend the trust themselves. This is by far the best and cheapest option as the parents can review the trust each year, put their son in charge of their affairs if they wish and make other appropriate changes. They can do this very easily by either making an amendment or restating the trust. Restating is amending the trust by rewriting the terms of the trust with the changes without actually creating a new trust.
If his parents do not have the capacity to make financial decisions, that doesn’t mean the son can’t amend the trust. Often powers of attorney permit an agent to amend a trust if the principal (person who makes the power of attorney) is incapacitated. Now, the powers of attorney will usually have limitations built in. For example, they may require the agent to follow the principal’s “testamentary intent.” This means that the beneficiaries of the estate plan should be generally the same. So, if the son wasn’t a beneficiary of the trust, he can’t make himself one now. He also still needs to act in the best interest of the principal. But, amending the trust to protect the assets and better care for his parents is just fine.
Let’s say the trust is an irrevocable trust, or perhaps the power of attorney doesn’t permit amending the trust, what then? There are still options.
Some trusts include “trust protectors.” This is a person named in the trust who can amend the trust in limited ways to make sure it still works. A trust protector is usually a trusted individual, occasionally an attorney, who can make amendments to the trust. Depending on the reason for the change, it is also possible to ask a Court to modify the trust. It’s even possible sometimes to “decant” a trust. Decanting is not really amending a trust, it is creating a whole new trust with new terms, and then transferring the assets from the old trust to the new one. These techniques are more complex and expensive, but very helpful, especially with very out-of-date trusts that haven’t been reviewed or amended in some time.
The key point is that is important to review and keep your trust up to date. But, even if you have a trust that is old or doesn’t work well, there are many ways to amend a trust to ensure proper administration of the assets for you and your beneficiaries.
Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”