If you are thinking about creating an irrevocable trust, you probably believe that once the trust is created you cannot change it, hence the term “irrevocable.” However, in some situations it may be possible to alter the trust through a process known as decanting. Let’s take a look at the term and how it applies.
Question 1: What is decanting a trust?
The decanting of a trust occurs when the trustee decides to transfer some of the trust property to a new trust. That new trust will have different terms than the original trust, thus allowing the trustee to perform actions the previous trust may not have allowed. Through this decanting process, the trustee effectively alters the terms of the original irrevocable trust by transferring the property to the new trust.
Question 2: Who are the beneficiaries of the new trust?
The trustee can only transfer property to a new trust that has the same beneficiary as the original trust. Decanting does not allow the trustee to perform actions that are contrary to the intent of the original trust creator, known as the settlor, but it does allow a trustee to distribute property as long as it is for the benefit of the beneficiary.
Question 3: Is decanting allowed in every situation?
No. Currently there are only nine states that have decanting statutes that specifically allow trustees to pursue this process without court approval. In all other states the trustee must go before acourt and ask its permission to decant.