Revocable Trusts

There are many instances in which a trust can be terminated, e.g., when the trust ceases to be economically efficient to administer or when the trust has been created as a result of fraud, duress, or undue influence. Recently, in Florida, more individuals have been creating revocable trusts. Floridians often choose this type of trust to avoid probate and to keep their private affairs out of the public eye in a probate proceeding. But when is a trust revocable? Who can revoke the trust? What steps must be taken and procedures followed to ensure that the trust is revocable?

One of the key distinguishing features of a revocable trust, as opposed to an irrevocable trust, is control. A settlor has control not just to revoke the trust, but to alter the trust as well. For example, the settlor of a revocable trust may add or remove beneficiaries of the trust during the settlor’s life and may also change the property that is owned by the trust. A major downside of this control is that the trust’s assets are easier for creditors of the settlor or of the beneficiaries to reach. Whereas, with regard to an irrevocable trust, the settlor does not have control once the trust is established, but the assets of the trust are better protected from the settlor’s creditors, and, depending on how the trust is structured, those assets may also be better protected from creditors of the beneficiaries.

Under Florida Statute § 736.0602(1), a trust executed on or after July 1, 2007, is always revocable, unless the trust instrument (the document that creates the trust) provides otherwise. However, trusts executed before this date cannot be revoked unless a right of revocation is reserved in the trust instrument. Fla. Stat. § 736.0602(1). If the trust instrument does not provide otherwise, the power to revoke the trust is personal to the settlor and only passes to the successor-in-interest if the settlor vests the power of revocation in that successor-in-interest. The best way to provide for a power of revocation in someone other than the settlor is to provide specific instructions in the trust instrument to that effect.

If the trust instrument sets out the manner of revocation for the trust, the settlor must follow those requirements. However, when the trust is silent on the manner in which the trust is to be revoked, the settlor, or another person specified to hold the power of revocation, must only manifest an intent to revoke the trust. An example of how a settlor may manifest his or her intent to revoke a trust is drafting a letter to the trustee specifically stating that the settlor wishes to revoke the trust. Although not a procedural requirement in Florida, in order to prove intent to revoke the trust and defend against a future challenge to the revocation, the settlor should have the letter notarized.

If someone you know has an issue regarding revocable or irrevocable trusts, or if you yourself would like to take appropriate action to avoid unforeseen complications with your own trust instrument, please do not hesitate to contact the law offices of Chepenik Trushin LLP. The experienced attorneys at Chepenik Trushin are ready, willing, and able to assist with such estate planning needs. Please feel free to contact us for an initial consultation.