Don’t Amend a Trust You Cannot Amend

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Want to avoid litigation in your estate?  The first step is to follow the terms of the Trust you created.  Many married couples create joint Trusts in California, but when one spouse dies the surviving spouse does not realize what the Trust terms require.  Your Trust may require you to split your assets evenly between two newly created sub-trusts called the Survivor’s Trust and Bypass Trust.  This division, when included in the Trust terms, is usually mandatory.  And when it does not occur, bad things happen.

The Survivor’s Trust is typically revocable and can be amended or changed at any time by the surviving spouse.  The Bypass Trust, however, is irrevocable and cannot be changed or amended.  The problem arises when the surviving spouse transfers all of the assets out of the Trust and fails to fund the subtrusts as required.  This can result in extended litigation after the survivor’s spouse dies.

Worse yet, the surviving spouse may try to amend the Trust even though half of the Trust cannot be amended.  This leads to a misunderstanding as to what was intended by the Surviving Spouse.

If you want to avoid disaster, the best way to start is to read and understand your Trust documents…and then follow it.  Amending a portion of the Trust that you do not have the power to amend is not a good start.  The same is true for transferring assets out of a Trust that you cannot completely control.  If you really want to avoid litigation, you must first follow the Trust terms.