When clients begin creating a trust, it usually leads to numerous questions about processes and the level of protection the trust grants their heirs and estate. At AmeriEstate, we invariably get questions about whether a trust can be changed after the person dies, especially for married grantors. So, can a spouse change a trust after death? It depends on the type of trust, the trust terms and whether the couple created a joint trust. Let’s walk through when a spouse can alter the trust after death and when the spouse can’t.
When Can a Spouse Change a Trust After Death?
Only revocable or living trusts can be changed, no matter who wants to make those changes. Living trusts allow the grantor to alter the terms or eliminate the trust altogether. This type of trust also provides a means for the grantor to make end-of-life financial, care and medical decisions.
If you become incapacitated and unable to make these eminent decisions for yourself for any reason (accident, illness, mental health condition), your trust establishes the roadmap that determines how you wish to be cared for, including who or what entity will do it. You also get to decide how your financial matters will be handled. Living trusts have additional benefits, including:
- Avoiding probate court
- Maintaining personal, family and financial privacy
- Providing for the care of dependent children
- Protecting your business from lawsuits
A living trust is an important element of your estate plan. How you set up your trust determines whether your spouse can change the trust after your death.
Joint Trusts
Are you and your spouse planning to create a joint living trust? If so, your spouse can amend the trust after you pass. A joint trust gives you and your spouse equal control over the trust and offers joint benefits. Generally, both spouses serve as co-grantors and co-trustees, determining the trust terms and managing the trust together.
When one spouse dies, the trust converts from a joint trust to an individual trust. As such, your spouse would have complete decision-making power. Your spouse would be entitled to amend the trust or dissolve it, regardless of whether you would have agreed with the decisions.
A joint trust is a great vehicle in some situations and it is certainly much easier than creating two separate trusts. At AmeriEstate, we recommend joint trusts primarily for clients who wish their spouses to inherit everything upon their death. Otherwise, any other heirs could be at risk of losing a portion or all of their inheritance, even if you agreed beforehand on what your other beneficiaries receive and how to handle assets and dispersal in the event of remarriage and potential stepchildren or children resulting from another marriage. If you have beneficiaries other than your spouse, you may want to consider an individual trust or an A/B trust.
A/B Trusts
An A/B trust is a good option for you and your spouse if you wish to jointly manage your assets while you both are still alive but have other beneficiaries you want to pass inheritance to after your death. In an A/B trust, you and your spouse place your assets in the trust, make all decisions about the terms of the trust together and jointly manage the trust. You may also choose to hire a trustee to manage the trust, just as you can in an individual trust.
When one spouse passes, the trust splits into two separate trusts. The survivor trust belongs to your spouse, while the bypass trust belongs to the spouse who dies. The purpose of this type of trust is to ensure current beneficiaries other than the surviving spouse receive their inheritance, regardless of future events in the survivor’s life. In this instance, the spouse can change a trust after death, but only the survivor’s trust, not the bypass trust.
However, certain states have laws — such as California’s Uniform Trust Decanting Act — that provide the spouse an avenue for altering the bypass trust. If your state has a law like this on the books, you will need to know how that law impacts your family if you and your spouse decide to create an A/B trust.
When Can’t a Spouse Change a Trust After Death?
Unless you and your spouse create a joint or A/B trust, there is usually little your spouse can do to alter or amend a trust after your death. Understanding your state’s laws is essential, as each state determines the specific actions a spouse can take. AmeriEstate’s attorneys can help you understand how your state’s laws impact your trust and estate planning decisions. Generally speaking, there are two types of trust that your spouse can’t change after death: Individual and irrevocable trusts.
Individual Trusts
If you create an individual trust, you are the sole grantor. You have full decision-making control over what happens to the assets during and after your lifetime. You can:
- Add and remove assets
- Assign trustees and successor trustees
- Determine who gets which assets
- Choose who handles your finances if you become incapacitated
- Decide what kind of care you wish to receive if you become incapacitated through illness, injury or mental health condition
Additionally, you have the power to dissolve the trust entirely. Your spouse cannot alter the terms of the trust or change any assets after you die. When you pass, your individual revocable trust becomes an irrevocable trust.
We should note that if you create an individual trust and your spouse is one of the beneficiaries, you can change the trust if your spouse dies. In this instance, a spouse can change a trust if the partner passes.
Irrevocable Trusts
Irrevocable trusts are unalterable by you or your spouse, whether during your life or after your death. If you create an irrevocable trust from the start, you lose decision-making rights. You cannot make any changes, nor can you dissolve the trust. Typically, you must appoint a trustee to manage your trust. Assets within the trust when you create it must remain in the trust. The beneficiaries listed also cannot change. The only way to change an irrevocable trust is to obtain permission from all beneficiaries.
An irrevocable trust offers protection from creditors and estate taxes. We usually only recommend this type of trust to those with substantial wealth who wish to avoid paying estate taxes.
Can a Spouse Change a Trust After Death if Appointed as the Successor Trustee?
A point of confusion for many clients is how much control the successor trustee has. The successor trustee is responsible for managing trust assets after the grantor’s death. A successor trustee pays the trust’s taxes, pays creditors and disperses the assets to beneficiaries according to the grantor’s wishes.
You can appoint an individual or an entity as your successor trustee, which means you can assign your spouse that role. However, if you have an individual revocable trust or an irrevocable trust, your spouse cannot change the trust after your death, even if your spouse is your successor trustee. The successor trustee has a management role and must look out for your beneficiaries’ interests.
Where Can You Get Help Determining if Your Spouse Can Change Your Trust After Death?
If you have an existing trust and still need help determining if a spouse can change a trust, AmeriEstate attorneys can help you decipher your state’s laws and how they apply to your trust. Additionally, if you need to create a trust, we are happy to assist and will help you determine the best trust type for you. Contact us today to learn more about our services.
Sources:
https://www.apsitaxes.com/blog/what-happens-to-living-trust-when-one-spouse-dieshttps://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB909