What is a revocable living trust?
A revocable living trust determines how your assets will be handled when you pass such as bank accounts, investments, valuable possessions, and real estate. A revocable living trust is a written document that is created during your lifetime, hence the name: “living” trust. You will place your assets in your trust to be transferred to your designated beneficiaries after you pass. It is possible to modify or cancel a revocable living trust at any time.
What is an irrevocable trust?
An irrevocable trust is a written document that is created where its terms cannot be amended, modified, or terminated without the permission of the grantor’s named beneficiaries. Once the grantor has effectively transferred all ownership of assets into the trust, the grantor has legally removed their rights of ownership to the assets and the trust.
When can a trust be modified?
Revocable Living Trusts: A revocable living trust can be amended or modified as long as the grantor is alive and retains the capacity to amend or change the trust.
Irrevocable Trusts: An irrevocable trust can be terminated if the trust has assets totaling less than $100,000. An irrevocable trust is determined by a trustee without a court order only when the trust has become unlawful, contrary to the public policy, or impossible to achieve.
It is also possible for a court to modify a trust if there is clear evidence of a mistake in the details of the trust. You may also be able to modify a trust to enhance the material purpose, should a situation arise that was not anticipated when the trust was initially drafted. Finally, a trust can be modified by the court when all of the trustees and beneficiaries agree to modify or terminate the trust to the extent that the modification or termination does not interfere with the settlor’s original material purpose of the trust.
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