An irrevocable trust by its nature is not one that is easily altered, which is why it’s described as “irreversible.” Nevertheless, there are some scenarios in which a trustee can take action that will for all intents and functions, alter the regards to an irrevocable trust. This is understood as decanting, and it involves transferring the trust property from one trust to another.
Due to the fact that the brand-new trust will have various terms than the initial, the trustee essentially changes the terms of the irreversible trust. While decanting is useful, it is not always simple to do or proper. Here are 2 crucial problems you need to understand about decanting and when it can be used.
Issue 1: Individual Authority or Judicial Approval
In general, a trustee can utilize decanting at his/her own discretion as long as the trust is situated in a state with a decanting law. If there is no such law, the trustee will most likely need to go prior to a judge and ask authorization to make the transfer.
Issue 2: Estate Administration Situations
The trustee can utilize decanting if he or she is doing so for the purposes of aiding the recipients. There are any number of scenarios in which decanting may be utilized effectively. A trustee may transfer trust property to a new trust located in a different state in order to take benefit of better tax laws. A trustee may utilize decanting if a recipient is suddenly handicapped and requires to apply for particular government programs that he or she would otherwise not qualify for if the trust remained the same.