A revocable trust is a flexible legal vehicle that lets the creator (known as the grantor) manage trust assets, as well as to alter the trust itself or its beneficiaries at any time in her lifetime. Also called a “living trust,” this trust is frequently used to transfer assets to heirs to avoid the time and expenses of probate. It is much different than if assets were simply bequeathed in a will. During the life of the trust, income earned is distributed to the grantor, and only after her death does its property transfer to the beneficiaries. How do you revoke a revocable trust?
A recent Investopedia article asks “How exactly does one go about revoking a revocable trust?” According to the article, people might revoke a trust for several reasons, but typically it involves a life change. A common reason for revoking a trust, is a divorce when the trust was created as a joint document with one’s soon-to-be ex-spouse.
A trust might also be revoked because the grantor wants to make changes that are so extensive that it would be simpler to dissolve the trust and create a new one. A revocable trust may also be revoked, if the grantor wants to appoint a new trustee or totally change the provisions of the trust.
Note that while they avoid probate, revocable trusts aren’t exempt from estate taxes. Because of the fact that the grantor has control of the assets during his or her lifetime, the property is considered part of the taxable estate.
When dissolving a revocable trust, first remove all the assets that have been transferred into it. This means changing titles, deeds, or other legal documents to transfer ownership from the assets of the trust back to the trust’s grantor directly. Next, have a legal document created that states the trust’s creator, having the right to revoke the trust, does want to revoke all terms and conditions of the trust and dissolve it completely. This is often called a “trust revocation declaration” or “revocation of living trust.” As a seasoned estate planning attorney to create this document for you to be sure that it is correctly worded and meets all the qualifications of your state’s laws. If the trust has a variety of assets, it is also often smarter to let an experienced attorney make certain that everything has been properly transferred out of the trust.
While it might be relatively easy to revoke a revocable trust, it is important to do it correctly. The dissolution document should be signed, dated, witnessed and notarized. If the trust being dissolved was registered with a specific court, the dissolution document should be filed with the same court. Otherwise, you can just attach it to your trust papers and store it with your will or new trust documents. If you are interested in learning more about RLTs, please read our previous posts.
Reference: Investopedia (Jan. 13, 2020) “How exactly does one go about revoking a revocable trust?”