Today, many estate plans contain irrevocable trusts that continue for the benefit of a spouse’s lifetime. What’s more, they continue for several generations. Because trusts like these span multiple decades, they include trust decanting provisions to address changes in circumstances, beneficiaries, and governing laws. In this blog, we discuss how to decant a trust.
What is Trust Decanting?
When someone declares a bottle of wine decanted, they mean a sommelier pours it from one container into another. To decant a trust, an attorney moves the accounts and property from an existing trust into a new trust with more favorable terms.
When to Decant a Trust?
Include provisions for trust decanting in trusts intended to last decades into the future:
As trust beneficiaries die and younger generations become the new heirs, vague provisions or outright mistakes in the original trust agreement may become apparent. Use decanting to correct these problems.
Clarify ambiguities or drafting errors in the trust agreement.
As trust beneficiaries die and younger generations become the new heirs, vague provisions or outright mistakes in the original trust agreement may become apparent. Use decanting to correct these problems.
Provide for a special needs beneficiary.
Make sure to tailer a trust to provide for a special needs beneficiary so they maintain government benefits. Decanting a trust enables the beneficiary access to monies in the trust.
Protect the trust’s accounts and property from the beneficiary’s creditors.
A trust gives the beneficiary control or access to their inheritance. What’s more, the beneficiary can lose the inheritance. Decanting converts a trust without any asset protection. It features full discretionary use the beneficiary’s creditors will not be able to reach.
Merge similar trusts into a single trust or create separate trusts from a single trust.
An individual may be the beneficiary of multiple trusts that have similar terms. Decanting can be used to combine these trusts into one trust that will reduce administrative costs and oversight. On the other hand, a single trust that has multiple beneficiaries with differing needs can be decanted into separate trusts tailored to each individual beneficiary.
Change the governing law to a different state.
Changes in state and federal laws can adversely affect the administration and taxation of a multigenerational trust. Decanting can be used to take a trust that is governed by laws that have become unfavorable and convert it into a trust that is governed by different and more advantageous laws.
Final Thoughts on Trust Decanting
Including trust decanting provisions in an irrevocable trust agreement or a revocable trust agreement that will become irrevocable at some time in the future is critical to the success and longevity of the trust. This will help ensure that the trust agreement has the flexibility necessary to avoid court intervention to fix a trust that no longer makes practical or economic sense. If you are interested in adding trust decanting provisions to your trust or would like to have the decanting provisions of your trust reviewed, please call our office.
About Skvarna Law Firm in Glendora and Upland, California
Let a skilled attorney assist with your estate plan. So, contact us today to learn about your options (909) 608-7671. We operate offices in Glendora and Upland, California. Therefore, we provide legal services for individuals living in San Bernardino, Los Angeles, Orange, and Riverside Counties. This includes the cities of Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Montclair, Pomona, La Verne, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma. Visit SkvarnaLaw.com to learn more.
