San Diego Estate Planning Lawyer Blog
Under California law, “Unless a trust is expressly made irrevocable by the trust instrument, the trust is revocable by the settlor.” This means that if you make a living trust as part of your estate plan, you are free to amend or revoke the trust at any time. You may, however, choose to make the trust (or part of a trust) irrevocable, in which case the trust should include clear language to that effect.
Court Upholds Husband’s Partial Revocation of Trust After Wife’s Death
Confusion over whether a trust is revocable can lead to litigation following the death of the settlor. Here is a recent example from here in California. This is only an illustration and not a binding statement of California law on the subject of revocable trusts.
In 2006, a husband and wife made a joint trust. Among other property, the trust contained the couple’s residence in Kern County, California. Although the trust contained language reserving the right of either settlor to “amend, modify or revoke” the trust at any point during their lifetimes, there was no language expressly stating under what circumstances the trust, or any part, would become irrevocable.
The wife died several months after creating the trust. About 17 months later, in 2008, the husband decided to transfer most of the assets from the 2006 trust, including the Kern County house, into a new trust. This 2008 trust specified a different distribution of assets upon the husband’s death than did the original 2006 trust. After the husband died in 2011, litigation ensued between the successor trustee of the 2008 trust and family members who wanted the original 2006 trust enforced.
Essentially, the courts had to decide whether or not the 2006 trust became irrevocable upon the wife’s death, in which case the husband illegally “stripped” the trust when he moved the assets into the 2008 trust. A probate judge ruled the trust did become irrevocable and ordered the trustee of the 2008 trust to return the house and other assets to the 2006 trust.
But the California Fifth District Court of Appeals reversed the probate court’s decision. “Because the 2006 trust was not expressly made irrevocable,” the appeals court said, “we conclude the presumption of revocability governs and the trust was revocable by [the husband] after [the wife’s] death.” But since the house and other assets in the 2006 trust were community property, the husband’s right of revocation only applied to his one-half interest in said property.
Need Trust Advice From a California Estate Planning Attorney?
There are a number of legal and financial issues to consider when making a trust, including questions regarding revocability and irrevocability. For example, there are many situations where there are tax benefits to creating an irrevocable trust for certain assets. A qualified San Diego estate planning lawyer can assist you with a drafting a trust, as well as amending or revoking an existing trust as your needs change. Contact the Law Office of Scott C. Soady today if you need to speak with an experienced estate planning attorney.