Amending a Trust: What are your Options?

If your trust no longer meets your needs, there are many ways to amend the trust to serve your goals for you and your loved ones.

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”

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Probate: Dissolving the Mystery
It is important to understand the probate process before deciding whether and how to avoid it.

Probate: Dissolving the Mystery

probate and estate planning
If you want to avoid probate, work with an experienced attorney to coordinate your plan and assets.

Probate avoidance is a common concern for our clients.  They frequently seek ways to pass their assets to their loved ones without going through probate.  Although it can be avoided with proper estate planning, probate avoidance should be done carefully and at the advice of an attorney as using piecemeal strategies usually don’t work, and sometimes create bigger problems.  For example, consider using trusts in your estate planning.  See this article for more information.  https://www.galliganmanning.com/how-do-trusts-work-in-your-estate-plan/

Before considering whether you want to avoid probate, it is important to understand what the process is.  The Street’s recent article on this subject asks “What Is Probate and How Can You Avoid It?” The article looks at the probate process and tries to put it in real-life terms.

Probate is the process by which an Executor (person put in charge of the Will) goes to court to prove the validity of the Will and their authority to be in charge of the estate.  I find it helpful to remember that the word probate is essentially Latin for “prove it.”

Every state’s process is different, but in Texas, the Executor starts by filing the Will and an application to probate along with other documents necessary to that case.  Next, there is a hearing before a probate judge.  The Executor and her attorney ask the judge to admit the Will to probate as the valid Will of the decedent and ask that the Executor be empowered to handle the decedent’s affairs as directed in the Will.

Once the Will is admitted to probate and the Executor agrees to serve, there are many tasks for them to complete.  They include the following:

  • Giving notice to the beneficiaries in the Will;
  • Giving notice to potential creditors of the estate;
  • Gathering, valuing and categorizing the decedent’s assets;
  • Prepare an inventory of those assets;
  • Paying off any of the deceased’s existing valid debts or fighting invalid ones;
  • Paying final taxes or expenses of the estate; and
  • Distributing the deceased’s property to those directed by the Will

The above are just the basic responsibilities of the Executor.  The probate process becomes more complicated when a creditor appears, the family disagrees, assets are entangled or cumbersome, such as land or business interests, or the Will was written without the aid of an attorney.  Even worse, it is hard for an Executor to locate assets in the first place!  This can make estates drag on months or even years.  I recently spoke with a client whose family is still going through a probate 10 years after the decedent has passed.

With all of that uncertainty, it is worth discussing your wishes with an experienced estate planning attorney who will be able to explain what strategies are used to avoid probate, how to remove certain assets from the process, or whether it needs to be avoided at all.  The key, as with all estate plans, is to find the option that fits your goals for you and your family.

Reference: The Street (July 29, 2019) “What Is Probate and How Can You Avoid It?”

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What Should I Know About a Special Needs Trust?

Leaving assets to loved ones with disabilities in a special needs trust can provide support while preserving government benefits.

Your loved ones with disabilities may be eligible for a number of government programs. However, Pauls Valley (OK) Democrat’s recent article asks “Can your family benefit from a special needs trust?” The article reminds us that these programs don’t cover everything. You may need to close the gaps.

Many government programs have eligibility restrictions based on the amount and type of financial assets that are available to the recipient. This means the financial help you want to provide may do more harm than good, unless you establish a special needs trust.

A special needs trust, also known as a supplemental needs trust and by the acronym SNT, is a trust that provides assets for a disabled beneficiary in the discretion of the trustee.  The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.  In short, for the needs not already served by the government benefits.

These types of trusts come up more often than people realize.  Often, clients consider making special needs trust for their children with disabilities.  But, it is also important to consider that elderly loved ones may utilize Medicaid for their long-term care.  If they do (or might) then it makes sense to set up a special needs trust for them as well.  This might be for elderly parents, siblings, or even spouses!  See our overview for more detail.  https://www.galliganmanning.com/practice-areas/elder-law/

When considering a special needs trust, you’ll need to look at several issues with your attorney.  First, whose assets will it hold?  If the disabled individual is creating or funding a trust with their own assets (called a First Party Special Needs Trust), you have a very different set of rules which I won’t address here.  If you are creating the special needs trust for someone else (called a Third Party Special Needs Trust) you need to consider who will be the trustee.

You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts and becomes a burden.  You could also name a trust company.  A trust company can provide professional management, expertise and continuity of administration, especially for younger beneficiaries who will outlive their care providers. A third option is to name an individual and a trust company as trustees.

The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.  Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it, as long as the person receiving benefits doesn’t contribute.  The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets. 

You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.

Speak with an experienced elder law or estate planning attorney about how you can to make life better for a family member with disabilities by using a special needs trust.

Reference:  Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”

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