In the past, making alterations to irrevocable trusts was an expensive and public process that was generally done through the courts. In 1992, New York was the first state to enact a decanting statute. In 2011, this statute was amended, making it easier to alter irrevocable trusts.
Trust decanting is a powerful tool which allows trustees to shift assets from one trust to a new trust. The ability to decant a trust empowers a trustee to extend the term of a trust or push back the age at which a trust beneficiary will have a right to the trust funds, create tax advantages, correct drafting errors, remove trust beneficiaries, and consolidate two or more trusts or create separate trusts.
Decanting is especially helpful in situations where the irrevocable trust has not been updated in response to changes in the law or in a family’s circumstances. If a trust meets certain criteria, decanting can be done outside of the court system, making it more affordable and private.
Trust decanting can be particularly useful where a beneficiary may be disabled and needs to rely upon government assistance. There are occasions when a trust is initially created, perhaps by a grandparent or parent for the benefit of a grandchild or child and the beneficiary’s disability may not have been known at the time. Under certain circumstances, the trust can be decanted to a new trust that provides for special needs trust provisions for the beneficiary, which will allow the beneficiary to maintain eligibility for government assistance.
Reviewing your trust documents regularly is important to assure that your documents reflect your family circumstances. Meet with one of our experts to determine if trust decanting can be helpful to you.
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