A revocable trust is a popular estate planning tool that allows individuals to manage their assets while they are alive, and distribute them after their death. However, it’s important to understand when a revocable trust becomes irrevocable, as this status can have significant implications for you and your beneficiaries. In this guide, we’ll explore the basics of revocable trusts and what happens when they become irrevocable.
How does a revocable trust become irrevocable?
A revocable trust becomes irrevocable when the grantor, the person who created the trust, passes away or becomes incapacitated. This is because the grantor is no longer able to make changes or revoke the trust. It’s important to consult with a qualified estate planning attorney to determine which type of trust best suits your needs and goals.
What happens when a revocable trust becomes irrevocable?
When a revocable trust becomes irrevocable, the grantor can no longer make changes or amendments to it. The terms of the trust become permanent and cannot be modified by the grantor. At this point, the trustee is responsible for managing the assets in the trust and distributing them to the beneficiaries as directed by the terms of the trust. Understanding when a revocable trust becomes irrevocable is important for estate planning purposes. That’s because it affects how assets are managed and distributed after the grantor’s death or incapacity. Seeking guidance from an experienced estate planning attorney can help ensure that your (or your loved one’s) wishes are properly documented and carried out.
Death of the Grantor (Trust With One Grantor).
The key feature of a revocable trust is that the grantor can change or revoke it at any time during their lifetime. But upon the death of the grantor, the trust usually becomes irrevocable, meaning that it can no longer be changed or revoked. At this point, control over the assets in the trust transfers to a successor trustee as outlined in the trust document. It’s important for both the grantor and beneficiaries of a revocable trust to understand this transition so they can ensure the grantor’s wishes are being carried out according to the grantor’s estate plan.
Death of a Grantor (joint trust created by a married couple).
A joint trust created by a married couple will typically become irrevocable upon the death of one spouse. This means that the surviving spouse cannot make changes to the trust, and it becomes permanent. However, some joint trusts are structured to remain partially or completely revocable even after one spouse dies. It’s important to consult with an estate planning attorney to understand your options and ensure your wishes are reflected in your trust. Please don’t assume you understand the language of the trust document without consulting with an attorney. (If you are dealing with an Arizona trust, call us at 602-443-4888.)
Grantor Becomes Incapacitated (Trust With One Grantor).
One important consideration in estate planning is the potential for incapacity. If the grantor becomes incapacitated and unable to manage their own affairs, then the revocable trust may become irrevocable as a result. This means that a successor trustee will have full control over the assets in the trust and is obligated to carry out any directions provided in the trust document . It’s important to plan for this possibility by appointing successor trustees who are able to step in and manage the trust if necessary, and by ensuring that clear instructions are in place for how the trustee is to manage the trust in such circumstances. Again, consult with an estate planning attorney to be sure the trust is managed property after a grantor becomes incapacitated.
One Grantor Becomes Incapacitated (joint trust created by a married couple).
If one spouse becomes incapacitated and is no longer able to manage their affairs or make decisions for themselves, the joint revocable trust may become irrevocable with respect to that spouse’s share of the assets in the trust. This is because the incapacitated spouse is no longer able to exercise their power to modify or revoke the trust.
The terms of the joint revocable trust will typically specify what constitutes incapacity and what steps need to be taken to declare one spouse incapacitated. Once the incapacity is established, the trust will become irrevocable with respect to the incapacitated spouse’s share of the assets. At this point, the remaining spouse who is still able to manage their affairs can continue to manage the trust and use the assets to provide for the incapacitated spouse’s needs.
It’s important to note that the terms of a joint revocable trust can vary depending on the specific language used in the trust document. That’s why it’s important to consult with an attorney to fully understand how a joint revocable trust may become irrevocable in the event of incapacity.
Both Grantors Become Incapacitated (joint trust created by a married couple).
When both grantors of a joint trust have become incapacitated, the entire trust is typically irrevocable. Again, however, it’s important to have an estate planning attorney interpret the document and properly advise the successor trustee(s).
Benefits and Drawbacks of Irrevocability
When a revocable trust becomes irrevocable, there are both benefits and drawbacks to consider. The main benefit is that the terms of the trust are now set in stone, and the assets held within it will be distributed according to those terms. This can provide peace of mind for the grantor, knowing that their wishes for their estate will be carried out as they intended. However, the drawback is that once a trust becomes irrevocable, it cannot be altered or amended by anyone, including the successor trustee(s). Therefore, it’s crucial to carefully consider all provisions and contingencies when creating a revocable living trust to ensure that they align with your long-term goals and desires for your estate.
The importance of consulting with an estate planning attorney.
Consulting with an experienced estate planning attorney is crucial when it comes to managing and distributing assets through a revocable trust, as well as understanding when the trust becomes irrevocable. If you are the grantor, the attorney can guide you through the process of creating or modifying a revocable trust to ensure that it aligns with your goals and objectives, while also helping you understand the legal implications of each decision. An attorney can also provide updates on any changes in state laws that may affect your trust, and help you make any necessary adjustments to ensure that your wishes are upheld in the future.
Let Us Help You.
Understanding when a revocable trust becomes irrevocable can be tricky. Not only does it depend on the terms of the trust document, but state law can also make a trust irrevocable. Also, there may be ways to amend a trust even after it is officially “irrevocable,” such as by asking a court to modify the trust or decanting the trust.
Call us at 602-443-4888. We are here to help.