Can a Trust Be Changed After its Creator Has Died?
Can a trust be changed after its creator has died? Unfortunately for beneficiaries, the answer is an almost certain "no." Let's talk about how trusts operate, and what that means for beneficiaries after the death of the trust creator, also known as the grantor, settlor, or trustmaker.
There are various types of trusts, but the most common and well-known is the revocable living trust, often just called a "living trust." Like all trusts, revocable living trusts involve three parties: the grantor; the trustee, to whom the trustee gives property to hold and manage; and the beneficiary, who benefits from the assets in the trustee's care. The trust instrument is the document that creates the trust, defines the rights and responsibilities of the parties, and sets the terms of the trust.
When someone makes a revocable living trust, they can occupy all three roles: grantor, trustee, and beneficiary. In most ways that matter, things are much the same as when the grantor owned the property in their own name. The grantor has complete control and use of the property in the trust, can make changes to the terms of the trust, and even end the trust altogether. The ability to terminate, or revoke, the trust during the grantor's lifetime is why the trust is called "revocable."
What Happens When the Grantor of a Trust Dies
When the grantor creates the trust, he or she will name a successor trustee. The successor trustee is positioned to take over management of the trust when the original grantor/trustee dies or becomes legally incapacitated. (If the grantor becomes incapacitated, say, by developing Alzheimer's disease, the successor trustee manages the trust assets for his or her benefit and that of any other named beneficiaries.)
Upon the grantor's death, the trust becomes irrevocable, its terms set in stone. Regardless of whether the grantor had intended to change or even terminate the trust, the trust terms as defined in the trust instrument at the time of the grantor's death are what control. If, for example, the grantor had a falling out with one of his adult children, and removed her as a beneficiary from the trust shortly before his death, then had a change of heart but didn't have the chance to restore her as a beneficiary, she would be out of luck.
If a couple establishes a revocable living trust in which they both serve as grantors, the trust instrument may provide that the trust will become irrevocable after the death of the first grantor spouse. In general, however, the trust does not become irrevocable until the death of the second grantor spouse. In the scenario above, if the husband dies first, and the wife knew of his wish to reinstate their daughter as a beneficiary (or she wished to do so herself), the wife could add the daughter back into the trust as a beneficiary even after her husband's death.
Why Does a Revocable Trust Become Irrevocable Upon the Grantor's Death?
Revocable trusts provide a way for people making an estate plan to maintain control of their assets during life, avoid probate for those assets upon their death, and maintain a measure of control over those assets after their death. For grantors who are worried, for instance, about what would happen should young adult heirs come into their entire inheritance at once, a trust offers a way to provide for loved ones while controlling how much money they get at one time.
A revocable trust also gives a way to incentivize certain behavior on the part of beneficiaries. For instance, if grandma wants her grandchildren to pursue higher education, she might arrange her trust to make a distribution to them for each semester they make Dean's List or when they graduate.
The ability to exercise some measure of control over how beneficiaries receive trust assets is one of the main advantages of a trust. If beneficiaries were able to circumvent that and make changes to the trust after the grantor's death, trusts would not be such an attractive option for many people.
Can a Trust Ever Be Changed After the Grantor's Death?
Under the Ohio Trust Code, an Ohio court may modify the administrative terms or dispositive terms of a trust, or even terminate the trust under very limited circumstances. If there were circumstances the settlor did not or could not anticipate, and changing the terms of the trust would actually further the trust's purposes, the court may modify. As far as practicable, a court modifying the trust would do so consistent with what the settlor probably intended.
Also, if continuing the trust on its existing terms would not be practical or would impair the administration of the trust, the court may modify the administrative terms of the trust.
It is possible that a court would agree to modify the dispositive terms of a trust (that is, who receives distributions, under what circumstances, and how much) if a petitioner were able to prove undue influence on the part of a beneficiary. However, such contests are uphill battles and are extremely difficult to prove. If you are a would-be beneficiary, or a beneficiary who does not like the terms of a trust, your recourse is likely very limited.
If you are a grantor, you should take steps to review your trust every few years while you are alive and capable to make sure that its terms still reflect your intentions.
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