In California, a trust is revocable unless the document provides otherwise. California Probate Code Section 15400 states:

Unless a trust is expressly made irrevocable by the trust instrument, the trust is revocable by the settlor. This section applies only where the settlor is domiciled in this state when the trust is created, where the trust instrument is executed in this state, or where the trust instrument provides that the law of this state governs the trust.

The ability to revoke a trust also includes a Trustor's right to modify the terms of the trust as well. This is specifically provided for under California Probate Code Section 15402, which provides:

Unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation.

*Settlor is synonymous with the term "Trustor" or "Grantor". It simply means the person who created the trust.

Because there can occasionally be confusion after the Trustor's death as to whether additional writings are valid amendments to the revocable trust, the terms of the trust should include specific provisions regarding how an amendment should be made.

Describing the specific procedures can also help to show the Trustor's intent to make a valid and enforceable amendment. Some common requirements include:

• The need for the Trustor to create a writing which specifies the modifications he or she is making to the trust.
• That the amendment be delivered to the Trustee.

The latter requirement is often informal since a Trustor is typically also the Trustee while he or she is competent and alive. 

Amendments v. Restatements

Amendments to revocable living trusts are sometimes created in the form of a "restatement". An amendment to a trust normally refers to a document which purports to modify a few provisions of an existing document. As a result, to understand the complete terms of the trust, one would need to have the original terms of the trust as well as the amendments to it to understand how the trust works.

A restatement, on the other hand, is an amendment to a trust which re-writes the entire document. With a restatement, there's no need to reference look at prior documents since the restatement itself contains all of the terms of the trust. A restatement is often preferred when one wants to make numerous changes to an existing trust document.

If you have a revocable living trust, you may find yourself needing to have an amendment prepared if you or your family experience major life changes. Luckily with modern word processing tools, this process is painless. Discussing your ideas with an estate planning lawyer will often allow you to accomplish your goals in the most efficient manner possible.

Some assets get transferred at the time of your death simply by operation of law. For example, assets that you own with others as joint tenants automatically become theirs upon your death. Other assets are transferred by virtue of beneficiary designations that you've used on those assets. A prime example would be the beneficiary you've named to receive your retirement account upon your death.

The threat of probate is occasionally overstated. However, relying solely on using the joint tenant form of title or beneficiary designations may fail to accomplish the objective of avoiding probate. For example, without further action, when the last surviving joint tenant on a property dies, it will need to be probated.

Beneficiary designations on accounts generally have the benefit of permitting one to name one or more alternate beneficiaries in case the primary beneficiary dies. Therefore, there's generally some ability to plan for contingencies. That being said, the naming of alternate beneficiaries may not be adequate to cover all of the potentialities of how your asset may need to be transferred. For example, if all of the beneficiaries you've named on a retirement account pass away, that asset may need to be probated at the time of your death to allow your heirs at law to claim it (which, by the way, may not be what you want).

Usually clients are advised to name their revocable living trust as either the primary or secondary beneficiary of assets that utilize beneficiary designations. This may depend on the client's marital status and other circumstances. Naming a trust as the beneficiary of retirement accounts involves consideration of the minimum distribution rules, so it's important to consult with a qualified professional when making changes.

The revocable living trust is considered by many practitioners to be the central document in modern estate planning for individuals in California. As you may already know, the assets held in a valid revocable trust pass without the need for the time and expense associated with probate. Thus, in many people's eyes, using a revocable living trust renders all of the benefits of a Will, without the downsides.

The trust document is the "instruction manual" that your successor Trustee (the person or corporate entity who you've put in charge after you become incapacitated or die) will use to manage and distribute your assets. Generally, the successor Trustee will be one or more individuals or corporate entities that you specifically name in your trust to succeed you. However, even if the successor Trustee you've named is unavailable or dies, the California Probate Code provides a statutory framework to resolve such issues. Specifically, California Probate Code Section 15660 provides:

(a) If the trust has no trustee or if the trust instrument requires a vacancy in the office of a cotrustee to be filled, the vacancy shall be filled as provided in this section.

(b) If the trust instrument provides a practical method of appointing a trustee or names the person to fill the vacancy, the vacancy shall be filled as provided in the trust instrument.

(c) If the vacancy in the office of trustee is not filled as provided in subdivision (b), the vacancy may be filled by a trust company that has agreed to accept the trust on agreement of all adult beneficiaries who are receiving or are entitled to receive income under the trust or to receive a distribution of principal if the trust were terminated at the time the agreement is made. If a beneficiary has a conservator, the conservator may agree to the successor trustee on behalf of the conservatee without obtaining court approval. Without limiting the power of the beneficiary to agree to the successor trustee, if the beneficiary has designated an attorney in fact who has the power under the power of attorney to agree to the successor trustee, the attorney in fact may agree to the successor trustee.

(d) If the vacancy in the office of trustee is not filled as provided in subdivision (b) or (c), on petition of any interested person or any person named as trustee in the trust instrument, the court may, in its discretion, appoint a trustee to fill the vacancy. If the trust provides for more than one trustee, the court may, in its discretion, appoint the original number or any lesser number of trustees. In selecting a trustee, the court shall give consideration to any nomination by the beneficiaries who are 14 years of age or older.

As you can see in part (d) above, even though probate may be avoided by using a revocable living trust, the beneficiaries may still use the court system to assist in matters such as appointing a trustee of a trust.

Another reason people may gravitate towards use of a revocable living trust is the relatively private nature of trust administration. Because probate is a court proceeding, the open public can get access to whatever may be filed in a particular probate. While trust documents must be disclosed to beneficiaries under certain circumstances such as when the creator of a trust passes away, that is the exception and not the rule.

At the end of the day, the time delay and cost associated with probate proceedings is often enough to convince people of the necessity of utilizing a revocable living trust.

Recently we discussed some common drafting techniques that are used when creating Wills and Trusts. In this post, we want to continue that discussion and point out some other things that estate planning lawyers do to help their clients avoid ambiguities when it comes time to administer their estate or trust.

Including Assets Not Subject to Testamentary Distribution

This concept is simple. Your Will or Trust should not attempt to transfer assets that are not able to be transferred by a Will or Trust. A simple example is assets that you hold as "joint tenants" with other people. By operation of law, as soon as you die, the other joint owners automatically become the owners of that asset. Including a provision where you try to transfer your interest in joint tenancy property may cause confusion among the beneficiaries and result in a fight among them, and the other joint tenants.

Residuary Clause

It's impossible to account for each asset that you own. That's why a "residue" provision is always included in Wills and Trusts. Essentially, the "residue" is everything else that is leftover after the gifts are distributed and expenses are paid for. Ensuring that you've named one or more beneficiaries to receive the residue ensures that the balance of your estate will be given to intended beneficiaries rather than passing by intestacy.

Change in Assets

Many years can pass from the time you create your estate planning documents to when you pass away. During that time, unexpected changes may happen to your assets. For example, you may decide to draw down on the equity in your home or move from one house to another. Therefore, it's important to anticipate these types of events. In your Will or Trust, you should include an explicit provision stating whether a particular asset will get distributed subject to, or free of, debt. When making a gift of your home, rather than mentioning a specific address, consider referencing your "personal residence" so that if you move, your then current home will be transferred to the appropriate beneficiary.

Disinheritance

If you decide that you would like to exclude your spouse or a child from receiving any assets of your estate, it is best to include a specific disinheritance provision explicitly stating your intent not to provide for them. Without including such a provision, a spouse or child may be able to assert that they are entitled to a portion of your estate as "omitted" heirs.

The mechanisms and provisions employed by estate planning lawyers are too numerous to inventory. Sometimes a great deal of thought and creativity must be used to draft a provision. Explaining your wishes is the first step towards ensuring that your lawyer can help you prepare documents that accurately capture what you want.