Trust Decanting: A Method for Modifying Irrevocable Trusts

You can create a trust in order to transfer assets to another person through a legal document. Trusts can be either revocable or irrevocable. When establishing a revocable trust, the grantor has the option to change it at any moment while still living. However, once you create an irrevocable trust, it's usually impossible to change it afterwards.

Therefore, many people are apprehensive when they hear the term "irrevocable" trust because they associate the word's permanence with the notion that if their circumstances change, a trust like that might no longer be in line with their wishes.

After an irrevocable trust is established, there is a means to creatively handle new conditions. The process is referred to as "trust decanting."

What Does "Decanting" a Trust Mean in Estate Planning?

Decanting is the process of taking an irrevocable trust that already exists, establishing a new trust with better terms and provisions, and then transferring the assets of the original trust to the new trust.

Decanting a trust could be a good idea for a variety of reasons. Correcting drafting flaws in the original trust document is among the most frequent reasons a trust decanting is taken into consideration. In other situations, adjustments could be necessary to more accurately reflect the grantor's objectives with regard to the trust. There might have been a discrepancy between the grantor's intentions and how the document was written.

In other situations, it can be essential to alter the trust's administrative rules, merge two trusts to improve administrative effectiveness, or take advantage of investment opportunities. The majority of the time, there is simply a change in circumstances that was not anticipated when the trust was first established. These sorts of issues are better accommodated by trust decanting.

Reasons You Might Want to Decant a Trust

There are numerous situations in which decanting may be beneficial. Here are a few examples:

• To permit more permissive investment or asset management rights, the trust's legal jurisdiction should be changed.
• A change in jurisdiction is requested because one state's more straightforward trust administration laws or another state's more favorable income tax treatment.
• A grantor wants to relocate to a place where trust disclosure is less onerous or provides for more privacy.
• A grantor/settlor may want to alter the age at which a beneficiary takes possession of assets or the beneficiary designation (for instance, due to a new family member or a change in ties).
• A grantor/settlor wants to change the parameters of trusteeship, such as the succession sequence, the investment powers, the compensation structure, or the creation of a power to dismiss trustees.
• To cut costs and improve the management structure, it might be advantageous to merge several trusts.
• For the sake of one or more beneficiaries, a trust termination date must be postponed.

Consult an Estate Planning Attorney

There are a lot more things to think about before deciding to decant a trust; the list provided above is not all-inclusive. Decanting is a sophisticated estate planning procedure that almost always necessitates the advice and support of an experienced lawyer. If an irrevocable trust cannot be decanted, in some states you may be able to modify the trust through the legal system or change it to a unitrust.

Your first step should be to consult with a lawyer if you're considering decanting an irrevocable trust.