Amending a Trust: What are your Options?

If your trust no longer meets your needs, there are many ways to amend the trust to serve your goals for you and your loved ones.

A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.

The son has numerous valid concerns about paying his parents’ bills, managing their assets and avoiding personal liability if they are sued.  The author addresses these concerns for the son, but I’d like to focus on one point: updating and amending the trust.

All estate plans change over time as an individual’s needs and wishes change.  Sometimes the trust will anticipate these changes, such as naming a successor trustee to take over when the trust creators can no longer make financial decisions.  In the son’s case, that might be enough.  However, if the trust doesn’t address the issue or if the trust makers’ needs and wishes change substantially, it is sometimes necessary to amend a trust.  Sometimes it is good to amend a trust for tax reasons, such as Mary describes here:  https://galligan-law.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/

If his parents have a revocable or living trust and have the capacity to handle their financial affairs, they can choose to amend the trust themselves.  This is by far the best and cheapest option as the parents can review the trust each year, put their son in charge of their affairs if they wish and make other appropriate changes.  They can do this very easily by either making an amendment or restating the trust.  Restating is amending the trust by rewriting the terms of the trust with the changes without actually creating a new trust.

If his parents do not have the capacity to make financial decisions, that doesn’t mean the son can’t amend the trust.  Often powers of attorney permit an agent to amend a trust if the principal (person who makes the power of attorney) is incapacitated.  Now, the powers of attorney will usually have limitations built in.  For example, they may require the agent to follow the principal’s “testamentary intent.”  This means that the beneficiaries of the estate plan should be generally the same.  So, if the son wasn’t a beneficiary of the trust, he can’t make himself one now. He also still needs to act in the best interest of the principal.  But, amending the trust to protect the assets and better care for his parents is just fine.

Let’s say the trust is an irrevocable trust, or perhaps the power of attorney doesn’t permit amending the trust, what then?   There are still options.

Some trusts include “trust protectors.”  This is a person named in the trust who can amend the trust in limited ways to make sure it still works.  A trust protector is usually a trusted individual, occasionally an attorney, who can make amendments to the trust.  Depending on the reason for the change, it is also possible to ask a Court to modify the trust.   It’s even possible sometimes to “decant” a trust.  Decanting is not really amending a trust, it is creating a whole new trust with new terms, and then transferring the assets from the old trust to the new one.  These techniques are more complex and expensive, but very helpful, especially with very out-of-date trusts that haven’t been reviewed or amended in some time.

The key point is that is important to review and keep your trust up to date.  But, even if you have a trust that is old or doesn’t work well, there are many ways to amend a trust to ensure proper administration of the assets for you and your beneficiaries.

Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”

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Estate Planning When Faced with a Serious Illness

More young and middle-aged workers find themselves in the role of family caregiver.
Everyone needs estate planning documents, but a serious illness makes that need more urgent. 

More than 130 million Americans are living with chronic illness. Forbes’ recent article, “Estate Planning Musts When You Or A Or A Loved One Has A Chronic Illness,” says that if you (or a loved one) are living with a chronic illness, you’ll likely need the same estate planning documents most people should have.

The article discusses these key estate planning documents, along with some suggestions that might help you customize them to your unique challenges because of chronic illness. These documents need to be tailored to your specific needs, so you should consult your estate planning and elder law attorney about what works best for you.  It’s also best to put your estate planning documents in place soon after your diagnosis, so that you can return your focus to your health, family and well-being.

HIPAA Release. The Health Insurance Portability and Accountability Act of 1996 governs the requirements for maintaining the confidentiality of protected or personal health information (PHI). A HIPAA Release lets someone you trust access your protected health information.  This is an important estate planning document because it provides your decision makers with information about your condition so they can best serve your needs.

Living Will. This is a statement of your health care wishes and can address end of life decisions, as well as many other matters. If you’re living with a chronic illness, there are special considerations you might want to make in having a living will prepared. For example, you might explain your specific disease while continuing to address other health issues.  You can address the disease you have, at what stage and with what anticipated disease course, and how if at all these matters should be reflected. It is also critically important to discuss these wishes with your loved ones before the issue arises so they understand what you want.

Medical Power of Attorney. This is sometimes known as a medical proxy. It is an estate planning document in which you designate a trusted person to make medical decisions for you if you’re unable to do so. You can give guidance to your medical agent about your preferences, goals and concerns in your medical care.

Financial Power of Attorney. This estate planning document lets you designate a trusted person to handle your legal, tax, and financial matters if you can’t or if it becomes difficult to do so. There are some unique considerations for those living with chronic illnesses to consider. One is the amount of control that should be given up now or at what stage. Another key issue in a power of attorney is if you should sign a special power that restricts the agent’s authority to certain specified items or sign a general power that provides broad and almost unlimited powers to the agent.  It is especially importantly that your power of attorney include authority to handle Medicaid and other long term care benefits if you are facing a serious illness.

Appointment for the Disposition of Remains.  This is a basic estate planning document by which you choose a person to execute your burial wishes and let them know what those wishes are.

Declaration of Guardians.  This is an estate planning document in which you name a person to serve as a court appointed guardian should you need one.  If you have the other documents in place you’ll likely never need this, but it is important to have as a safety net naming someone you trust to be guardian instead of a court appointed agency or lawyer if the need ever arises.

Will and Revocable Trust. Finally, Wills and  Revocable Trusts are estate planning documents which control the flow of assets at your passing.  You should speak with your attorney about which is right for you, but if you or a family member has a chronic illness, using a revocable trust may be a good way to provide for succession of your financial management.  A revocable trust allows the successor trustee to act quickly to manage the finances if you cannot do so yourself and under the guidelines you create.  This way, the trustee can pay for the care you need.

Everyone should have these estate planning documents as part of a well-crafted legacy plan, but if you or a loved one is facing a serious or chronic illness, you may be facing additional challenges that make this planning more critical.

Reference: Forbes (July 5, 2019) “Estate Planning Musts When You Or A Or A Loved One Has A Chronic Illness”

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Power of Attorney: Why It Is Important

Don't wait to create a power of attorney.
Don’t wait to create a power of attorney.

Unfortunately, you never know when a power of attorney will be needed to allow someone else to make financial and medical decisions for you. An accident or sudden illness can occur without warning. A power of attorney is a necessary document if your are too ill, injured, or lack the mental capacity to make your own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are two basic power of attorney documents or “POA’s”: one for making financial decisions and one for making medical decisions. A financial POA may be effective immediately or when a doctor certifies that you are unable to handle your financial affairs. A medical POA  becomes effective when you cannot communicate a medical decision. Until then, you are completely in charge of decisions related to your medical care.

If you don’t have a POA and you are unable to make financial and medical decisions for yourself, a guardian must be appointed in a court proceeding to make decisions for you. This is an expensive and time consuming process and the outcome may not be what you would have wanted.

Anyone over the age of 18 should have a financial and medical power of attorney. Many parents start realizing this when their children go off to college. Parents are often surprised and frustrated when they find out that, because their college age children are considered adults, the parents no longer have access to their children’s financial and medical information, not even in an emergency.  That’s why our next client education seminar on June 26 is devoted to what estate planning documents students need to have in place before they go off to college. (See our website at www.galliganmanning.com for more details and information on how to register.)

While it’s never too early for a person 18 years of age or older to have medical and financial powers of attorney in place, you could wait until it’s too late. If you become incapacitated, you cannot sign a POA. We often see this when children of aging parents contact us in a panic because their parents never executed powers of attorney. If the aging parent lacks capacity and cannot sign a POA, the family is faced with the need to pursue a guardianship.

You should work with an estate planning attorney to create the powers of attorney you need.  An estate planning attorney will be able to tailor your POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select.

Review your POA’s at least annually to be sure that the people you have selected are still the people you want taking care of your financial and medical matters, if the need should ever arise.

Most important of all, don’t wait to have powers of attorney created for you. They are even more important than a Will because the powers of attorney affect your care while you are alive.

Learn more about powers of attorney and other estate planning documents.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

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