How To Revoke Or Terminate Your Living Trust
A living trust is a useful legal tool that facilitates the direct transfer of assets to heirs, bypassing the often complex probate process. If your circumstances change and you need to revoke your living trust, the process varies depending on the trust’s type and other factors.
What is a Living Trust?
A living trust is established during your lifetime to streamline the transfer of assets to your heirs upon your death. It designates a trustee to manage the trust's assets for the beneficiaries while you're alive. Unlike a will, a living trust usually avoids probate.
There are two main types of living trusts:
- Irrevocable Living Trust: This type cannot be modified or revoked after its creation. It offers benefits like avoiding estate taxes and protecting assets from creditors but provides little control over the assets.
- Revocable Living Trust: This type allows changes and can be revoked anytime, maintaining greater control over the assets. However, it does not offer tax benefits or creditor protection, as the trust assets are still part of the grantor’s taxable estate.
Reasons to Revoke a Living Trust
Revoking a living trust may be necessary for various reasons:
- The terms no longer align with your estate planning goals.
- You wish to change the distribution schedule, successor trustees, or trust provisions.
- You want to transfer the trust assets back to your name.
- The trust is no longer needed.
Common scenarios for revocation include divorces or substantial changes in your estate plan. Often, it may be simpler to revoke and create a new trust than to amend an existing one.
How to Revoke a Living Trust
For a revocable living trust, follow these steps:
- Remove Assets: Retitle assets from the trust back into your name.
- Complete a Revocation Form: Fill out and sign a formal revocation form, which may need to be notarized.
- Review Trust Provisions: Check for any specific instructions on how to revoke the trust and to whom you must send the revocation notice.
After the death of the trust creator, the trust typically provides for its termination and the distribution of assets to beneficiaries. In many cases, transferring assets to beneficiaries effectively revokes the trust. Consult a lawyer if needed to ensure proper execution of these steps.
Amending a Trust
Instead of revoking, you might consider amending or restating the trust. Amendments are used to make specific changes, while a restatement involves updating all terms of the trust while keeping its name.
The Bottom Line
Revoking a living trust is straightforward with revocable trusts but more challenging with irrevocable ones. The key steps are transferring assets back into your name and completing the necessary paperwork.
