15 Jul Changes for dad’s living trust
Q. I just became the successive trustee of my father’s revocable living trust. Now that the trust has been transferred to my name, can I change and/or eliminate the remaining successive trustees?
A. The mere fact that you are now the trustee does not mean you can change any of the terms of your father’s trust document. This includes changing or eliminating the remaining named successor trustees.
However, because the trust is revocable, as opposed to irrevocable, if your father is still alive and competent to do so, he would be able to change and/or eliminate the remaining successor trustees, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park. If, however, you have become trustee because of the death or incompetency of your father, the trust is now in essence irrevocable.
Every trust is different, Romania said, and the specific language of the trust document itself is important and must be carefully read.
“Unless the trust specifically authorizes you, as the trustee, to remove a named successor trustee and appoint a different trustee, you do not have such power,” Romania said. “Although it is unlikely that the trust permits a trustee to change or eliminate a named successor trustee, it is not unusual for a trustee to have a power, granted in the trust document, to name additional successor trustees where there are no remaining successor trustees willing to serve.”
This would be the case if the successor trustees named in your father’s revocable trust all agreed to renounce — refuse — their appointments, she said.
“Unfortunately, if the document does not provide a mechanism for the appointment of additional successor trustees, and if all named successor trustees renounced or otherwise were unable to serve, you may be required to obtain a court order appointing additional successor trustees,” she said.
At least 22 states have a decanting statute, which permits a trustee to pour assets from an existing trust into a new trust created by the trustee where the receiving trust has different terms and conditions than the distributing trust, Romania said. In essence, decanting enables a trustee to modify an irrevocable trust.
But — New Jersey does not have a decanting statute.
“If your father’s trust was governed by the laws of a state which has a decanting statute, this would be another alternative,” Romania said. “Even then, every decanting statute is different, some more restrictive than others, and the manner to effectuate the decanting under the statute, as well as the consequences of the decanting, must be carefully considered.”
Sounds like you should sit down with an estate planning attorney who can look at the trust and advise you based on the language of the trust.
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This story was first posted in July 2015.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.