Your Guide to Understanding Trusts, Restatements, and Amendments to Trusts
Understanding the distinctions between a Trust, an Amendment to a Trust, and a complete Restatement is crucial for individuals navigating estate planning and managing their assets. Each serves a specific purpose in tailoring the Trust to address changing circumstances, but they differ in scope and intent. Here is your guide to understanding all three. Trust A Trust is a legal arrangement in which a person (the grantor or settlor) transfers assets to a Trustee who manages and administers those assets to benefit designated beneficiaries, including the original grantor. The creation of a Trust (and proper funding) is how you avoid probate, protect yourself in the event of an incapacitation, and protect your beneficiaries after you pass away. The first Trust you sign is your original Trust. It is identified by a Trust name and its effective date (usually the date it was signed). That first document establishes the existence of your Trust. Amendment to a Trust An Amendment to a Trust is a legal document that modifies a Trust in whole or part. It can add or modify provisions in an existing Trust without creating an entirely new Trust. An Amendment might be a short document that replaces a specific paragraph or section in the original Trust, or it could completely replace the entire Trust document with a brand-new set of terms that supersede all the terms in the old Trust. Restatement A complete Restatement of a Trust involves creating an entirely new Trust document while retaining the original Trust’s funding and structure. A Restatement is an Amendment to the Trust because, while a Restatement is a brand-new document, it keeps the original name and date of the Trust. Imagine it as a new book but with the same cover/title as the old book. A Restatement replaces every provision in the original Trust but keeps the name and date so the Trust owner does not have to re-title all the assets within the Trust. A Restatement ensures all Amendments and revisions are integrated into one cohesive document, eliminating potential confusion that may arise from multiple amendments that build on each other. All Restatements are Amendments, but not all Amendments are Restatements.
Why do we prefer Restatements at Preston Estate Planning, even if we are only amending a few provisions? Partial Amendments build on each other, and they do not stand alone. For example, the First Amendment might replace Section 2.01 of the original Trust, and the Second Amendment might replace Sections 3.01, 3.04, and 9.02. The Third Amendment may replace the new Section 3.04 that was replaced in the Second Amendment. The Fourth Amendment could replace Section 2.01 again. When the Trustmaker passes away, the Trustee must compile all the Amendments and figure out which Amendments are valid and which Amendments were entirely or partially voided by subsequent Amendments. As you can imagine, this is very messy and can even lead to litigation. Conversely, a Restatement is a standalone document read in isolation. We still retain copies of your original Trust and any Amendments so they can be produced if a court or financial institution requests them (like establishing a chain of title). Still, we don’t have to piece together all the provisions from the previous versions. Instead, the last Restatement is the version that controls and supersedes all prior versions and Amendments. While Trust Amendments and complete Restatements are tools used to revise a Trust, relying on Restatements rather than partial Amendments is much cleaner and less susceptible to error. Additionally, using Restatements rather than starting over with a new Trust name and date is much safer because you don’t have to worry that assets will inadvertently be left in the old Trust. If that happens, the old Trust terms will govern those assets. It may be tempting to think that a complete Restatement is more complicated than a short Amendment. The Restatement is usually much longer, after all. On the contrary, Restatements are almost always the cleanest and safest approach to revising your Trust.
2 PrestonEstatePlanning.com
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