As of March 2017, decanting a trust is only allowed in 20 states around the country. But as the process becomes more and more popular, it is expected that the doors will open in every state to allow irrevocable trusts to be decanted. People’s needs change and sometimes estate planners don’t do the best job when putting together an irrevocable trust with a client. When this happens, decanting a trust through a more experienced estate planner can make everything right.
What is Decanting a Trust?
When an old trust no longer meets the needs of its principals, then the assets of that trust can be moved into a new trust. This is referred to as decanting a trust, and it can help to clean up any issues in a trust that have caused problems for a family or any other group over the years.
The process for decanting a trust starts with finding an attorney or estate planner who is experienced in the process. There are plenty of ways to make mistakes when decanting a trust, and that is why you want someone who is experienced in the process. There are some rules to follow before your trust can be decanted, but the process is normally quick and simple.
The Rules for Decanting a Trust
First and foremost, decanting a trust has to be legal in your state for it to be done. Secondly, the trust agreement must allow the trustee to make decisions on the principal and assets within the trust. Many trusts only allow the trustee to supervise financial distributions based on conditions such as the passing of one of the trust members. For decanting to take place, the trustee must have the assigned power to transfer the principal and all assets into a new trust.
When Would I Decant?
If your trust has undergone many changes over the years, or throughout the previous generations, then it may be time to put a new structure in place that better suits the needs of the members. Some of the conditions could include members getting divorced and remarried several times over, removing and adding assets, and changing beneficiaries around.
In some cases, an old trust may have been poorly constructed by the original attorney. Obviously, this does not infer any malice on the part of the originally attorney. The normal circumstance is that the attorney was not very experienced in trusts, and the one that was created needs to be replaced. In this respect, decanting is an excellent option for everyone involved.
The reason decanting is becoming so popular is because attorneys are finding it a useful tool for bringing in new clients. Most people who have trusts do not realize that they can simply decant their old trust and get a better structure in place. This is why so many older trusts are reworked over and over again until they are difficult for the trustee to maintain.
With decanting, an old trust gets a new start with a new structure and a clearer set of rules. If you have an older trust that is causing problems with your family or group, then talk to your estate planner about decanting. If decanting is allowed in your state, then it could be the option you have been looking for.