{"id":4010,"date":"2019-09-30T11:36:54","date_gmt":"2019-09-30T19:36:54","guid":{"rendered":"https:\/\/dslawcolorado.com\/?p=4010"},"modified":"2019-09-30T11:36:54","modified_gmt":"2019-09-30T19:36:54","slug":"the-abcs-of-rlts","status":"publish","type":"post","link":"https:\/\/dslawcolorado.com\/the-abcs-of-rlts\/","title":{"rendered":"The ABCs of RLTs"},"content":{"rendered":"

You may have heard of a revocable living trust (RLT), which is a commonly used estate planning<\/a> solution. But what exactly are they, who is affected by them, how can they be changed, and what do they accomplish?<\/p>\n

What Are They?<\/strong><\/p>\n

Trusts<\/em><\/strong>, which are legal entities that hold title to property for the benefit of a living person, are often used as an alternative or supplement to a will<\/a>. A revocable living trust<\/em><\/strong> (sometimes called a revocable trust, an inter vivos trust, or a living trust) is a trust that you create during your lifetime and can change at any time prior to your incapacity or death. RLTs are distinguishable from irrevocable living trusts, which are difficult to alter after their creation (though there are a few possible ways, for example, by making limited changes permitted by the terms of the trust, asking a court to order changes, or shifting the trust\u2019s assets into a new trust).<\/p>\n

Who Is Affected by Them?<\/strong><\/p>\n

The living person or charity benefited by the trust, but who does not have legal title to the money or property in the trust, is called a beneficiary<\/em><\/strong>. The individual who creates the trust, decides how it will operate, and determines what property or funds to include in it is called the grantor<\/em><\/strong> (but may also be called the settlor or trustor). The trust is administered by a trustee<\/em><\/strong>, who is in charge of managing and investing the funds or property in the trust and distributing them to the trust beneficiary according to the grantor\u2019s instructions, memorialized in a trust agreement<\/em><\/strong>. Typically, the grantor names a successor trustee in the trust agreement who will manage the trust if the original trustee becomes incapacitated, passes away, or is otherwise unable to serve.<\/p>\n

Often, though not always, the grantor of the RLT is both the initial trustee and primary beneficiary. So, you create the trust and provide the funds or property for it, you manage, invest and control the property and money owned by the trust, and you distribute the trust funds to yourself as desired. While the grantor is alive and well, the tax identification number of an RLT is the grantor\u2019s social security number, and any income earned by the trust is taxed as the grantor\u2019s personal income.<\/p>\n

How Can They Be Changed?<\/strong><\/p>\n

If circumstances change, as they often do, you can alter the RLT through amendment, restatement, or revocation. Typically, a trust amendment<\/em><\/strong> can be made by attaching a properly drafted and executed amendment to the original trust document. An amendment may be appropriate for minor changes or deletions, such as replacing a successor trustee. If more significant changes are needed, such as changing beneficiaries of the trust, or if the trust has already been amended multiple times, a document called a restatement<\/em> of trust<\/strong> should be created. This document allows you to \u201crestate\u201d or rewrite the entire original trust agreement incorporating any necessary changes instead of revoking the original trust and creating and transferring assets to a completely new trust.  There are circumstances that neither an amendment nor a restatement are appropriate, in which case you can revoke the trust<\/em><\/strong>. A revocation may be warranted if a major change such as a divorce or death of a beneficiary occurs and involves dissolving the trust entirely and transferring the assets owned by the trust back to yourself or into another trust.<\/p>\n

The law of most states provides that changes should be made according to instructions provided in the trust document, or if there are no instructions, in a way that clearly evidences your intention to make the changes. For example, if you amend the trust, you should create a written document, signed by the grantor and trustee, with a title that shows it is an amendment to the specific trust you are amending. The document should set forth the trust\u2019s name, the date, and the name of the trustee. It should also mention the portion of the trust document that allows amendments to be made and should identify the part of the trust that will be changed, deleted, or added. If there is more than one grantor and the changes are made by fewer than all of them, notice should be provided to the grantors who did not participate in the changes.<\/p>\n

Warning:<\/strong> If the trust has grantors who are spouses or domestic partners, and the trust document does not provide otherwise, most states have special rules regarding changes:<\/p>\n