Readers respond, we provide clarity on trusts and transfer on death instruments
Comment: I read your recent article about trusts and beneficiaries of trusts. You mentioned that “If you have a revocable trust, as the beneficiary you have the right to amend the trust and update it to decide who can serve as trustee and who should be the beneficiary under the trust.”
I’m not aware of any provision that allows a trust beneficiary to amend a revocable trust unless they are also the grantor. Based on the above it seems like you are saying that simply being a beneficiary allows for such powers. Perhaps you meant to say “as the Grantor…”
Ilyce and Sam respond: In most living trust situations, you have the person that creates the trust (the trustor), the person that runs the trust (the trustee) and the person that benefits from the trust (the beneficiary).
When most people create a trust, they choose a living trust where the trustor, the trustee and the beneficiary are all the same person. In this situation, that person can do as they please with the trust so long as the trust they created is a revocable and amendable trust.
In other types of trusts or other situations, the trust terms may not allow changes or revocations. The particulars of the trust may prevent the beneficiary from making changes to the trust.
Let’s say you set up a trust to care for a child. The trustor may be a grandparent, the trustee may be the parent and the beneficiary would be the grandchild.
You wouldn’t expect to give the grandchild the power to amend the trust. You’d expect the trustee to handle the affairs of the trust in order to care for the grandchild. You would also expect that the trustee would not have the ability to amend that trust and distribute funds other than for the care of the grandchild. In this situation, the grandparent might have retained the power to change the trust terms and only the grandparent could make changes to the trust while they were living.
We should have been clearer in our last article and let our readers know that when they set up their own trust, they should retain the right to amend or revoke the trust as they see fit — if that is the type of trust they want to have.
Having said that, there are various trusts for different purposes; and you should consult an attorney that concentrates their practice in the area of trusts for more information.
Comment: In your response to a recent question about inheriting a house, you neglected to mention that there is a transfer on death instrument (TOD, and sometimes referred to as TODI) for real estate. The TOD would transfer ownership of real estate upon the owners’ deaths without going through a trust or probate court. It is prepared and recorded similar to a deed, and works very well if all other transfer on death accounts are properly prepared.
...continued
