Wine may get better with age, but the same cannot be said for some irrevocable trusts, as any experienced trust attorney will tell you. Maybe you’re the beneficiary of a trust created by your great grandfather seventy years ago that no longer makes sense. Or maybe you created an irrevocable trust twenty years ago that doesn’t work as it should. You may wonder: how to fix a brokentrust that has turned from a fine wine into vinegar? You may be surprised to learn that under certain circumstances the answer is yes, by applying the decanting definition to the old broken trust and turning it into a brand new one.
What Does Decant Mean?
Wine lovers know that the term “decant” means to pour wine from one container into another in order to open up the aromas and flavors of the wine. In the world of irrevocable trusts, the decanting definition is the following: a legal process through which the trustee appoints or distributes trust property in further trust for the benefit of one or more of the beneficiaries. In other words, by trust decanting, the trustee transfers some or all of the property held in an existing trust into a brand new trust with different and more favorable terms.
When Does it Make Sense to Perform Trust Decanting
Decanting an irrevocable trust makes sense under many different circumstances:
- Tweaking the trustee provisions to clarify who can or cannot serve as the trustee.
- Expanding or limiting the powers of the trustee.
- Converting a trust that terminates when a beneficiary reaches a certain age into a lifetime trust.
- Changing a support trust into a fully discretionary trust in order to protect the trust assets from the beneficiary’s creditors.
- Decanting a trust to clarify ambiguous provisions or drafting errors in the existing trust.
- Changing the governing law or trust situs to a less taxing or more beneficiary-friendly state.
- Adding, modifying, or removing powers of appointment for income tax or other reasons.
- Merging similar trusts into a single trust for the same beneficiary.
- Creating separate trusts from a single trust to address the differing needs of multiple beneficiaries.
- Providing for and protecting a special needs beneficiary.
How Does Decanting Work for an Irrevocable Trust?
While decanting definition explains the process itself, this must be allowed under applicable state case law or statutory law. Aside from this, the trust agreement may contain specific instructions with regard to when or how a trust may be decanted.
Once it is determined that the trust can and should be decanted, the next step is for the trustee to create the new trust agreement with the desired provisions. The trustee must then transfer some or all of the property from the existing trust into the new trust. Any assets remaining in the existing trust will continue to be administered under its terms, otherwise, the empty trust will terminate.
Work with a Lawyer Who Can Put the Decanting Definition into Practice
Planning for your future and that of your family should be done very carefully. You need an estate attorney who has full knowledge of trust law in your state and listens to you carefully.
Once your wishes are clarified and understood by all parties, the lawyer will put the decanting definition into practice and distribute the assets in your old trust to the newly created ones.
Beware: Decanting a Trust is Not the Only Solution to Fix It
While the decant solution may work under certain circumstances, it is not the only way to fix a “broken” irrevocable trust. At Miller Law Firm, PC, we can help you understand the process and evaluate all of the options available to determine how to fix a broken trust.
We have three offices in King of Prussia, PA, and Lebanon/Lancaster, PA, but we can also assist you with decanting an irrevocable trust in and around:
- Phoenixville
- Wayne
- Plymouth Meeting
Call us now: (855) 936-3886!