A trust is one of the most common tools that residents can use to craft unique estate plans so that their assets are passed on as efficiently as possible. However, many worry about using these tools for fear of their permanency, or wondering whether they can change their mind down the road. These are natural concerns that all residents should discuss when working on these issues.
If a settlor (person creating the trust) fails to include language in the trust that would make it revocable, he or she usually still has a statutory right to revoke or amend the trust.
But what about agents who act on one’s behalf with regard to the trust?
It is important to note that an agent or “attorney-in-fact” doesn’t have the same statutory authority. The agent only has the authority to do the things that have been prospectively planned by the creator of the trust. The power of attorney may grant an agent the right to create trusts and name trustees following the wishes of the settlor. The law clearly states that the power of attorney is forward-looking but it is silent as to an agent’s right to restructure past estate planning devices, including a trust.
A person’s intentions regarding estate planning should be clearly set forth in order to avoid any ambiguity and prevent unwanted modifications by another party such as the agent. That is why it is most important to have a qualified estate planning attorney review your estate planning documents.
CA Probate Code on the Power of Attorney
According to the California Probate Code, an attorney-in-fact under a power of attorney may perform any of the following acts on behalf of the principal or with the property of the principal if the power of attorney expressly grants authority over property to the attorney-in-fact:
(a) Create, modify, revoke, or terminate a trust, in whole or in part, only as provided by the trust instrument.
(b) Fund with the principal’s property a trust not created by the principal or a person authorized to create a trust on behalf of the principal.
(c) Make or revoke a gift of the principal’s property in trust (d) Exercise the right to reject, disclaim, release, or consent to a reduction in, or modification of, a share in, or payment from, an estate, trust, or other fund on behalf of the principal.
(e) Create or change survivorship interests in the principal’s property or in property in which the principal may have an interest.
(f) Designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal’s death.
(g) Make a loan to the attorney-in-fact.
The Power to Amend an Irrevocable Trust
A trust has to contain clear language laying out an individual’s intent to make it irrevocable if he/she wishes it to be so. Often when the language in the trust is not clear, issues arise upon the settlor’s death. The statutory right to revoke or amend an otherwise irrevocable trust is a personal right, which may only be exercised by the person who creates the trust.
Even though the power of attorney is a broad one, giving the agent the right to act on behalf of the principal, the authority granted to the agent with regard to trusts and estate instruments extends only to actions taken prospectively.
The bottom line is this: trusts can be revocable or irrevocable and special rules can be set up ahead of time to determine who has the power to change a trust down the road.
To keep your estate administration from being compromised by a power of attorney either to your disadvantage or that of your beneficiaries, in our area it is critical to contact a San Diego estate planning attorney to discuss your intentions.