Adaptability is an often-overlooked priority in estate planning. After all, financial and family situations change. The economy changes. “The only thing that is constant is change,” as Greek philosopher Heraclitus famously put it. So, when changes in your life inevitably occur, you want to be able to adapt your estate plan in Florida (or elsewhere) to meet them. When it comes to trusts, the way to “adapt” or change your estate plan is by “amending” or preparing a trust amendment in Florida. An amendment can be done for either a revocable or irrevocable trust in Florida generally speaking, and there are some specific requirements to do this correctly.
Amending a Revocable Trust vs. an Irrevocable Trust in Florida
Revocable living trusts in Florida have become a popular Florida estate-planning tool in part because they offer just this kind of flexibility. Where an irrevocable trust in Florida is difficult (though not necessarily impossible) to modify once in place, the grantor of a revocable trust retains the power to adapt the trust to life’s changing circumstances. This can mean terminating a trust that has become unnecessary, reforming a trust if its purpose has substantially changed, or – if only relatively small tweaks are necessary – executing a trust amendment conforming to your current estate-planning goals.
What is a Trust Amendment?
A trust amendment is an addendum or edit that revises or supplements an existing trust. While the essence of the trust remains intact, an amendment adjusts whichever details the grantor needs changed or added. An amendment can be accomplished through an attachment incorporated into an existing trust or involve a more complete overhaul, with an entirely new declaration of trust prepared and executed. Importantly, though, in either approach, the trust itself survives. So, assets already within an amended trust do not need to be reassigned like when a trust is terminated and a brand-new trust created.
In Florida, grantors of revocable trusts generally have considerable flexibility to amend, revoke, or terminate trusts for any reason or for no reason at all. And, under Florida law, a trust is assumed to be revocable unless the trust instrument expressly declares itself irrevocable. You might consider amending a revocable trust in response to a major family change like a marriage, divorce, birth, or death. Or, you could amend a revocable trust if you want or need to designate a different successor trustee – or if you simply changed your mind about distributions.
Whatever the reason, amending a revocable trust is a fairly straight-forward process in Florida. However, an amendment must be accomplished correctly. An improper amendment is ineffective, potentially invalidating the trust and sabotaging an entire estate plan.
Amending a Revocable Trust Properly
The general rule is that a revocable trust can be amended by the grantor (the Florida statute uses the synonymous term “settlor”) in accordance with the amendment procedure set forth in the trust’s declaration. So, if you want to amend a trust, reviewing the declaration is a good place to start. If no specific procedure is established, Florida law permits a grantor to amend by executing a later document “manifesting clear and convincing evidence” of the grantor’s intent.
Typically, a grantor who wants to amend a trust advises an estate-planning attorney of the desired changes, and the attorney prepares a supplemental amendment document to be attached and incorporated within the original declaration of trust. Or, the attorney might edit the declaration to include the changes and the grantor then execute the revised version.
For the most part, an amendment to a revocable trust entails action by the grantor him or herself, and the grantor’s mental capacity must therefore meet the same “of sound mind” standard required for a will. Under certain circumstances, a court-appointed guardian or someone acting under power of attorney can amend a revocable trust, but, in the latter case, only if permitted by the declaration of trust.
If a trust has more than one grantor, each grantor can amend the trust to the extent the amendment deals with property derived from that grantor’s contribution to the trust. If duel grantors are spouses and marital property is involved, both must consent to any amendments.
Perhaps most importantly, if a Florida trust includes “testamentary aspects” (i.e., provisions relating to property distributions after the grantor’s death), any amendments affecting the testamentary portion must observe the formalities applicable to wills under Florida law. So, for example, an amendment changing a long-term beneficiary of a living trust must be attested by two witnesses.
Issues with Amending an Irrevocable Trust
By definition, an irrevocable trust in Florida is significantly more difficult to amend than a revocable trust. In most cases, someone with an interest in the trust needs to file a petition asking a judge to approve the requested amendment. To secure judicial approval, the petitioner must justify the amendment by presenting evidence that the grantor’s actual intent differed from what is expressed in the trust instrument or was based on a mistake of fact or law. To modify a material term, the petitioner needs to demonstrate that the term is contrary to the trust’s purpose, or that compliance would be illegal, impossible, or unfeasible.
In limited circumstances, an irrevocable trust can be amended non-judicially via a written agreement between the trustee and the beneficiaries. Non-judicial amendments usually deal with technical issues like reporting or administrative requirements, rather than the substantive operation of the trust.
Florida law also allows for a process called “decanting” when permitted by an irrevocable trust’s terms. A trustee decants a trust when he or she distributes the trust’s assets into another trust with more appropriate or advantageous terms. Decanting is not permissible with all trusts and can never be used to limit or overcome the rights of a beneficiary. And the decanting process can only be performed by a trustee granted sufficiently broad discretion over distributions.
Testamentary trusts in Florida, or trusts created through a will are created by adding a trust section in a Florida last will and testament, are always irrevocable because the trust does not become effective until after the grantor’s death, after which the grantor is not able to make any changes. Prior to the grantor’s death, a testamentary trust cannot be amended because it technically has not yet come into existence. However, the grantor can modify the eventual trust’s terms by amending the will provisions establishing the trust and any trust documents which have yet to take effect.
Common Trust Amendment Mistakes to Avoid
If you’re trying to amend a revocable trust, it’s vital to comply with the terms of the trust’s declaration. Under Florida law, if a trust sets forth a method for amendments, that method takes precedence. An amendment which is otherwise statutorily compliant, but which fails to satisfy the trust’s amendment requirements, is ineffective.
Along the same lines, amendments must meet any applicable statutory requirements. That means, if the amendment impacts distributions to be made after the grantor’s death, it must meet the endorsement standards applicable to wills. A handwritten revision with the grantor’s initials won’t cut it; nor will an unsigned addendum not witnessed by two disinterested parties.
Insufficient documentation and precision are also unfortunately common mistakes in trust amendments. If an amendment is made via a written addendum it should unmistakably reference the trust being amended and specifically identify the affected provisions. The actual changes should be stated unambiguously in enough detail to remove any room for confusion. An amendment needs to provide “clear and convincing evidence” of precisely what the grantor intends to do.
If a trust amendment in Florida impacts multiple sections or the whole declaration, it may be easier to re-write and re-sign the entire document. Numerous amendments can get confusing, especially if the trust is revised more than once and later amendments modify earlier amendments. Remember, the trust itself can survive a thorough reworking or a reformation as long as the new document follows the original document’s amendment procedure and satisfies Florida’s execution requirements.
Although doing a trust amendment in Florida for a revocable trust isn’t overly complicated, it must be done correctly. Under the right circumstances, even an irrevocable trust can be modified with a judge’s approval. An experienced Florida trust and estate-planning attorney can provide advice on how best to amend a trust to meet your present circumstances and guide you through the process of implementing an effective amendment.
Steve Gibbs, Esq.