Most people we talk to know a typical revocable living trust is, well, revocable and that also means the trust can be changed or amended as time goes on. However, we often find this is where general knowledge of estate planning ends. After discussing the authority to amend the trust, the question as to who has this authority and when does the ability to change the trust comes up. Below, we'll be discussing just that - who has the power to change or revoke a trust and can a trustee change or revoke a trust?

To answer these questions fully, you need to know some vocabulary. Don't worry, its only two words: trustor and trustee. We’ve covered these words in detail in our Revocable Living Trust in Plain English post, but if you haven't read that, we'll quickly summarize it here. The trustor is the person or persons who created the trust and puts their assets into it (sometimes called a grantor), whereas the trustee is the person or persons who manage whatever assets are held by the trust.

Who Can Change a Trust?

Who has authority to make changes or revoke the trust later on? If your instincts tell you the trustor, then you're right. Trustors not only create the trust but retain the authority to make changes to the trust's provisions or revoke it entirely if they wish. The trustee's powers are comparatively limited here. Trustees can only manage the assets in the trust according to the terms of the trust – set out by the trustor – and the trustee operates in the best interest of the beneficiary. The trustee cannot make changes to a trust in their capacity as trustee.

Thus, to answer the question of whether a trustee can change my trust without me, no... with an asterisk. Everything discussed so far is true, but there are some common situations to be aware of if you are interest in setting up a revocable living trust or already have.

Death of All Trustors

The first is what happens when the trustors have all passed away. If the trustors have all passed, then the trust becomes irrevocable since the only ones with authority to revoke it are dead. If the trustors were also the trustees at the time, which they often are, then a new, successor trustee will take over the trustee position - someone the trustors selected when creating the trust initially. That successor trustee does not have authority to make changes to that trust. However, if a successor trustee finds the trustor or trustors executed an amendment under undue influence, coercion or duress, then they can petition a court to find the particular amendment void and the trust terms revert to the prior terms.

Death of First Spouse

Next is where we have more than one trustor - typically a married couple. The trust can specify otherwise, but usually, upon the death of one spouse, the surviving trustor spouse retains the authority to amend or revoke the trust. We'll cover this topic in more detail in a later video but know that this is generally done to keep a marital estate simplified and not complicate it by forcing a split of assets, early distributions where one spouse may still depend on those assets, and to avoid potentially unnecessary taxes and administrative hassle. Just know that spouses often create a trust together; they will be both trustors and co-trustees of said trust; and unless the trust specifies otherwise, the survivor among them has the authority to amend or revoke the trust in their capacity as the surviving trustor, not as a surviving trustee.

Removing a Co-Trustee

Lastly, we've already addressed the successor trustee and voiding amendments, so to close, I'll address a few related specific questions we've received. First up is the question as to whether a co-trustee can remove another co-trustee - as in if two trustees are serving together, can one remove the other? Generally, not without showing the trustee to be removed has done something to give cause for removal by violating a trustee duty of care or loyalty by, for example, mismanaging the trust, not being forthcoming with information and records, or stealing money from the trust estate. The trust itself may even specify these criteria.

Removing the Initial Trustee

Next is whether a successor trustee can take over while the initial trustee is still alive? A successor trustee only becomes trustee at the death, incapacity, resignation or removal of the initial or prior trustee, and not before then. Death and resignation should be pretty straightforward. Incapacity is when the trustee is either in a coma or is incapable of managing the affairs of the trust, typically after a doctor finds them unable to do so and attests to such in a doctor's note.

Removal is more complicated and warrants its own video, but the trust itself should have language in it laying out when a trustee is considered unfit to serve and may even require an opinion of a neutral third-party to determine whether the trustee meets said criteria such as the aforementioned doctor's note. Otherwise, removal can be done by a judge after petitioning a probate court.

Can a Trustee Cut out a Beneficiary or Alter Their Distribution?

The last two questions can be combined since they are related and that is whether a trustee can remove a beneficiary or change the distribution to be made to a beneficiary. Again, the controlling factor is going to be the language of the trust, but a trustee cannot unilaterally, that is of their volition, cut out any particular beneficiary or change what their distribution can or will be. There are provisions that provide a trustee with discretion as to how to make distributions, but those provisions are going to be explicit and lay out the criteria by which the trustee's discretion is exercised.

Two common examples are drugs and age. Sometimes, people will require a beneficiary to be clean from drugs for a period of time in order to be eligible for part of or the whole of their distribution. Otherwise, their inheritance stays in trust for their benefit. In a similar vein, some people will require a beneficiary to reach a certain age before their inheritance can be distributed.

However, in either case, a good trust will still allow the trustee to have some discretion to make preliminary distributions for health, education, maintenance, and support. These typically encompass things like medical bills, school tuition, groceries, or rent.

Summary

To bring things back to the start, only the trustor has the authority to make changes or amendments to a trust or revoke it entirely. Trustees can only manage those assets within the trust and are bound by the parameters of the trust, set out by the trustor. However, trustees may be able to exercise some discretion within those terms only where specified.

BETHEL LAW CORPORATION
ESTATE PLANNING | ELDER LAW | BUSINESS PLANNING

CLICK HERE OR CALL US AT 909-307-6282 TO SCHEDULE A FREE CONSULTATION.