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The Potential Pitfall of a Revocable Trust

On Behalf of | Sep 20, 2010 | Estate Planning |

A revocable trust is a trust that can be changed or canceled by the grantor. The income earned from the trust is distributed to the grantor, and after the grantor’s death the property within the trust transfers to the beneficiaries. A revocable trust is a good tool for changes in circumstances because the grantor is able to adjust the provisions of the trust. But, what happens when the grantor is influenced by a beneficiary with impure motives?

Sometimes the grantor can be influenced by the beneficiaries they love or by a person who was not even a part of the original trust to change provisions of the trust in their favor. This can happen through duress or undue influence. Usually a trust will state that if the grantor becomes incapacitated, they cannot make distributions from or changes to the trust without an expert’s opinion.

Undue influence is often hard to detect. That is because many times, a family member or spouse is the one influencing the change. A signal of undue influence can be when a grantor unexpectedly asks an attorney to benefit one child over another or to benefit a previously unmentioned party. If someone you love has a revocable trust, you should always question the motivation for trust changes and odd or suddenly unfair requests. The party wishing to take advantage of a grantor may craftily take the grantor to a different attorney not familiar with the grantor’s estate and surrounding issues and facts. Other family members can provide helpful oversight when these kinds of red flags arise.

An irrevocable trust will protect the trust from any revisions and protect the grantor from the undue influence of others. Decisions about revocable and irrevocable trusts should be discussed with an experienced estate planning attorney.

Source: Monterey County Herald, “Liza Horvath, Senior Advocate: Trusts and Undue Influence,” Liza Horvath, 9/13/10