Some trusts can be modified or terminated, while others can’t—it depends on the terms of the trust and whether the trust is “revocable.”
Trust Basics
To set up a trust, you create a trust document. The trust document states the purpose and terms of the trust. It also names a trustee or trustees to manage the property, as well as beneficiaries who will receive the property. (It's very common for those making living trusts—called "settlors" or "grantors"—to name themselves as the trustees while they are alive.) You then transfer 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. Whether you modify or end a trust depends on whether it's revocable or irrevocable. So if, for example, you wanted to find out if someone can cancel a trust fund, you'd have to first find out if it's part of a revocable or irrevocable trust.
- Revocable trusts can be changed or cancelled by the settlor at any time.
- Irrevocable trusts cannot be changed or terminated. There are some exceptions, depending on the type of trust and its terms. For example, in some cases you may be able to change an irrevocable trust if all of the beneficiaries agree, if the change is in the best interest of the beneficiaries, or if another legal exception applies.
Two common trust categories are living trusts and testamentary trusts. Here are some details about modifying or terminating these trusts.
Living Trusts
Living trusts are usually created to avoid probate and they are almost always revocable. Typically, the settlors of a living trust name themselves as the trustees of the trust, as well as a "successor trustee" who will become the trustee once the settlor dies. In other words, the settlor of a living trust usually has the power to change or terminate the trust during the settlor's lifetime. 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.
How to Modify a Living Trust
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 (the person who made the trust), and notarized. Generally, a living trust cannot be changed or revoked after the death of the settlor.
Testamentary Trusts
A testamentary trust is a trust that is created when the settlor dies. Typically, a will maker sets up a testamentary trust within a will; this 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.
Why Might You Modify or Terminate a Trust?
You might want to make changes to, or even terminate, your revocable trust to:
- accommodate a significant life event in the family, such as marriage or divorce, death of a beneficiary, or the birth of a child
- accommodate the loss of, or loss of value of, trust property
- add or remove beneficiaries
- adjust how the trust property is distributed among the beneficiaries
- add or remove successor trustees, or
- adjust the powers given to trustees.
In addition, you might want to revoke an existing trust to replace it with a new trust or estate planning document.
When Do Revocable Trusts End on Their Own?
The trust document usually states when the trust will end—for example, when the beneficiary reaches a certain age or when a specific purpose is achieved. Some simple revocable living trusts end upon the death of the settlor, after which the successor trustee distributes the property directly to the beneficiaries.
All trusts terminate when their funds are depleted or if their purposes become unattainable.
An Attorney Can Help
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.
Questions for Your Attorney
- Is it better for me to make a testamentary trust or a living trust?
- Should I revoke my current trust and make a new one, or make an amendment instead?
- Do I need to change my trust if I have another child after the trust was made?