"It's
like decanting a bottle of wine; you pour the wine into a new bottle to air it
out," says Mark Haranzo, a partner at law firm Withers Bergman. In trust
terms, you pour the assets of an old trust into a brand-new trust that
essentially allows a redo.
Irrevocable trusts can be a
great tool in planning for your estate. Unfortunately, the “irrevocable” nature
of your irrevocable trust can be a big flaw if your objectives change. What
happens if your irrevocable trust now conflicts with your goals?
Enter “decanting.”
A recent article in Barron’s explored this common dilemma in
an article with a catchy title: “How to Bust a Trust.”
The “irrevocability” of an
irrevocable trust makes changing the trust a very difficult practice under
normal circumstances. Normally, this is a good thing. Why have all of the time,
effort, and money you invested to plan your estate be undone? Accordingly, the
traditional process for changing the terms of an irrevocable trust has been
rightfully onerous.
Unfortunately, it’s not entirely
uncommon that the machine needs some retooling, let alone re-lubricating.
Perhaps the laws have change significantly, and your original goals for your
loved ones have proven unworkable or even detrimental to them. In a worst case
scenario, the inheritance could become a curse rather than a blessing.
In short, to “decant” the trust
is to work around those harsh legal and people conditions, realigning the trust
to conform to the new environment. The decanting process involves pouring the
assets from one vessel to another – from one trust to a new form of the trust
or an entirely different trust. Like a fine wine, decanting breathes new life
into the assets once held in a trust that no longer suits its purposes.
This is not a do-it-yourself
project, however. It can prove to be complex rather quickly. In fact, at
present, decanting is only possible in 18 states. Consequently, the laws of
your state will determine whether the process is available, as it matters where
your trust exists.
For more on decanting and more
obligatory wine references, be sure to read the original article. This is
information worthy of your consideration whether you are establishing your
family trust now, are a trustee, or a beneficiary.
For more information and articles on
estate planning and elder law topics, please visit our website
and sign up for our free monthly e-newsletter. You can also friend
our law practice's Facebook page (R Christine Brown).
Reference: Barron’s
(March 2, 2013) “How to Bust a Trust”