Updating Revocable Trusts in North Carolina
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Getting a revocable trust established and properly funded is a significant accomplishment in structuring one’s estate plan, yet it is not an end goal that precludes future planning efforts. Most people will experience at least one significant life event after creating their living trust that warrants revisiting the document to see if it still meets one’s planning goals. Likewise, changes to tax and other laws might affect a document that was created in a prior legislative climate. Updates to one’s revocable trust may be made by an amendment or a complete restatement. An amendment updates a specific part of the trust, while a restatement updates the entire trust.
Amendments vs. Restatements
Imagine a recipe card used for years. If one or two steps have been crossed out and replaced, the card may still be legible. However, if many provisions have been altered, the recipe is likely confusing. If loved ones can’t read the instructions and determine whether to add a cup of flour or a cup of sugar, the recipe won’t work. The same can be said about a revocable trust. Making one or two amendments may be acceptable and warranted by the circumstances. When numerous revisions occur, however, the instructions may become confusing, with potentially significant effect if the person administering one’s trust is unable to discern the terms of the document. A restatement may better serve this situation.
Although amendments generally are used to make smaller changes, and restatements are used for larger ones, there’s no single rule when it comes to amending or restating a revocable trust. A general guideline to follow is that anytime an individual makes changes to more than two sections of the document, a restatement may be the better option. Restatements help to:
- Prevent beneficiaries from discovering prior terms
- Avoid ambiguity
- Provide an opportunity to address other updates, such as applicable legislative changes
- Foster ease of understanding and administration
- Reduce the amount of paperwork to retain and provide to financial institutions
- Decrease the risk of misplacement
North Carolina law provides that a guardian or agent granted authority to do so under a power of attorney may revoke, amend, direct disposition, or make additions to a revocable trust. The law also provides that an individual acting in the aforementioned roles can create a revocable trust on behalf of the principal if appropriate authority exists under the power of attorney.
Before deciding whether to amend or restate one’s trust, it’s important to determine whether previous changes accurately reflect the grantor’s intent and whether additional changes might adversely affect how the trust is administered. Meet with a trust attorney to help determine the best way to update a trust. A comprehensive review of one’s trusts can help to identify items that need attention—even irrevocable trusts may need to be changed. Learn more about modifying irrevocable trusts in North Carolina.
