Trust decanting
Trust decanting is the movement of assets from an existing trust into a second trust with changed terms. Estate planning practitioners describe options for addressing trust problems as varying by state and trust language. Owners of businesses, real estate and private investments, and their spouses and adult children, meet the term when a trust holds those interests.
How it works
The second trust carries terms that differ from those of the original trust.
Practitioners say decanting typically cannot add beneficiaries. Practitioners point to added restrictions on decanting for trusts built around marital or charitable deductions.
Where it shows up for owners of businesses, real estate and private investments
A trust that holds a family company, a rental property or a private investment is a trust like any other for decanting purposes. Practitioners report that decanting may clarify language or adjust distribution, tax, and administrative provisions in such a trust.
State laws differ, and practitioners note that some trusts do not qualify for decanting. The law of the governing state and the language of the original trust frame what a decanting can change.
Points that are easy to confuse
Changing the terms is a separate matter from changing who the beneficiaries are, and practitioners note that decanting generally cannot add beneficiaries.
Utah's decanting statute includes an express-prohibition rule. A trustee in Utah cannot decant if the first trust's terms expressly prohibit distributing to a separate trust.
Common questions
What notice does Utah's decanting statute describe?
Utah's decanting statute requires a trustee to give all beneficiaries written notice before using decanting power to modify a first trust's terms. The notice comes from the trustee and goes to all beneficiaries, and the trustee gives it before the power is used.
Who can be a beneficiary of the second trust in Georgia?
Under Georgia's decanting statute, the second trust cannot include a current beneficiary who is not a current beneficiary of the original trust.