Editor's note: This following is the final article in a five-part series examining new laws that went into effect at the beginning of the year:
A new law that went into effect Jan. 1 covers revocable trusts. But at least one local attorney expresses a degree of skepticism over the need for Act 822.
As enacted, the law permits the trustee of a revocable trust to "follow a direction of a settlor [i.e. the person who made the trust] that is contrary to the terms of the trust."
"I don't see this law being used that much," said Paragould attorney H.T. Moore. "And I don't think people will be comfortable with doing what's contrary to what the person who made the trust wanted to do with it."
Section 3 of the law (section 28-73-603 of the Arkansas Code, Annotated) permits the trustee to "follow a direction from the settlor and the other person holding the power to revoke even if the direction is contrary to the terms of the trust."
"It [the law] creates a unique set of circumstances," said Paragould attorney Lorie Whitby, "in which the planner or someone other than the trustee can make changes in the trust."
Moore added that he personally would require authorization from a court to make such a change.
According to www.investopedia.com, "A revocable trust is a trust whereby provisions can be altered or canceled dependent on the grantor [i.e. settlor, the person who made the trust]." According to the same source, "a trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary."
Moore said that unless the entity is a bank, which deals wth multiple trusts, any need to change the terms of a revocable trust is most easily addressed through changing the specific section of the trust. "People can and do modify the applicable sections of a revocable trust on a routine basis," he said.
On the other hand, said Whitby, the new law does permit changes in the trust without going through a lengthy process.
"You wouldn't have to change the trust if, say, the tax laws changed," she said, "like if the law said one thing at a previous time and now it's not that way."
Whitby and Moore agreed that the law could allow changes in the trust even after the death of the settlor/trustor, based upon verbally expressed desire or intent. Moore said he is not comfortable with such a situation, while Whitby acknowledged such changes could not be made unless the trustee still meets his or her professional liabilities.
"It [the law] creates a unique set of circumstances," she said, "in which the planner or someone other than the trustee can make changes in the trust."