Revocable Trusts; Will Substitutes

Question 1

*Revocability of Trusts

Answer 1

All trusts are revocable and amendable by settlor unless expressly made irrevocable by the settlor

revocable = grantor can change instructions, remove assets, or terminate the trust

Guardian of incapacitated settlor can only revoke trust by court order that it is in best interests of the ward.

Divorce revokes all provisions in favor of former spouse and relatives of former spouse

Question 2

Retention of Broad Powers by Settlor

Answer 2

Trust valid despite retention of any one or more broad powers by settlor:

Income for life;
Power to revoke, alter, or amend;
Power to control trustee in trust’s administration;
Power to add property, life insurance proceeds, employee benefits to trust;
Settlor can name herself trustee, to serve as long as she has capacity

Question 3

*Pourover will

Answer 3

writer of a will creates a trust, and decrees in the will that the property in his or her estate at the time of his or her death shall be distributed to the Trustee of the trust.

Valid if:

Even if trust is subject to revocation and amendment and is later amended

Even if trust is unfunded

The trust need not be in existence before or executed concurrently with will

Question 4

Life insurance proceeds as trust asset

Answer 4

Unfunded revocable life insurance trusts

Could name trustee as beneficiary (goal: to stagger life insurance payments instead of a lump sum) and it would be valid.

Expensive for a new trust though.

Instead, could just name “the trustee named in my will” as the policy beneficiary.

Question 5

Trust Alternatives: Survivorship Bank Accounts

Answer 5

Right of survivorship in joint account must be expressly stated in agreement

Short-hand language (JT, JTWROS, Joint Tenancy) not enough

Language that merely authorizes payment to survivor not enough
Signed by party who died (or both parties if community property)

Extrinsic evidence not admissible to show intent/deny right of survivorship

Question 6

Trust Alternatives: Durable Power of Attorney

Answer 6

Purpose: authorizes another person to act on behalf of the principal

Must be signed and acknowledged by notary public

Agent’s authority not affected by principal’s incapacity or disability if it says so.

Springing durable power
Power of attorney becomes effective only upon incapacity or disability

Question 7

*How must revocations/amendments of trusts be made?

Answer 7

Any revocation/amendment must done be made in reasonable manner (if not set out in trust instrument) and always in writing (no witness requirement).