Among the various components that typically make up a comprehensive estate plan is often a trust. People choose to includes trusts in their estate plan because of the numerous and varied estate planning goals and objectives that can be reached using a trust. One question that people often have when considering the inclusion of a trust in their estate plan is “ Will my trust need to be changed if I buy or sell assets? ”. The answer to that question depends, to a great extent, on the type of trust created.
Trusts are broadly separated into two categories – testamentary and living trusts and then further divided into irrevocable and revocable trusts. A testamentary trust is one that only takes affect after your death. A living trust, on the other hand, becomes effective during your lifetime. Revocable trusts are trusts that can be changed or even revoked by the grantor at any time whereas an irrevocable trust cannot be changed, modified, or terminated by anyone (except a judge in limited circumstances). This may lead you to believe that assets owned by an irrevocable trust cannot be sold and newly purchased assets cannot be added to the trust. That is not necessarily the case.
The terms of any trust are important; however, the terms of an irrevocable trust are even more important to get right during the creation of the trust because they cannot be modified or changed after the fact. Those terms may allow the trustee of the trust to sell trust assets. Likewise, those same terms may allow for the continued funding of the trust by additional asset being transferred into the trust. If the trust terms do not allow for the sale or purchase of assets, however, you will not be able to sell or purchase any assets as an irrevocable trust cannot be changed after it takes effect.
Selling or purchasing assets with a revocable living trust is much simpler. The terms of the trust must be followed just as is the case with an irrevocable trust; however, if those terms create an issue with regard to the sale or purchase of assets. Those terms can easily be changed by the grantor of trust (you).
If you are uncertain which type of trust best suits your needs, take the time to consult with your Missouri estate planning attorney.