Decanting a fancy bottle of wine may be familiar to most people, but there is a new type of decanting: trust decanting. The Uniform Trust Decanting Act was enacted in California on September 14th. Trust decanting is a method in which a trustee may distribute trust assets from an old irrevocable trust into a new one, or amend an existing irrevocable trust, without court approval. It has its limitations; only certain trusts can be decanted. You can’t decant a trust established for charities, for example. In this article I will explain what you need to know about the Uniform Trust Decanting Act and how you can take advantage of it to protect your assets.
1. Who Is Involved?
Before exercising decanting power, the trustee must give notice to very specific people who will be involved in the process. These people include the settlor, beneficiaries, trustees of the former trust, trustees of the new trust, and the attorney general in some instances. The act provides specific guidelines as to what the notice should include. A recent modification of this act entails stricter provisions than the original. If you are located in the San Francisco Bay Area, specifically in the cities surrounding Antioch, Concord or Walnut Creek, feel free to reach out to The Law Offices of Joel A. Harris to get more information on what to include.
2. What Is Allowed?
The Trustee of a trust may wish to update legal provisions, correct legal or drafting errors, take advantage of new tax laws, clarify ambiguities, and protect beneficiaries from changed circumstances, health conditions or creditors.
3. What Is Not Allowed?
Not following the regulations of trust decanting can lead to serious consequences. Decanting should not be abused as a way to defeat the settlor’s initial intent. The Uniform Trust Decanting Act prohibits decanting that defeats tax or charitable purposes of the settlor. The more initial control the trustee has over the distributions of the trust, the more freedom they have to modify the trust through decanting. There are provisions as to what can be modified by the trustee. Generally speaking, the most important provision to remember is that trustees cannot change the original beneficial provisions of the trust itself. For more information on what is or is not prohibited, contact The Law Offices of Joel A. Harris.
“The Uniform Trust Decanting Act prohibits decanting that defeats tax or charitable purposes of the settlor.”
4. Who Will Benefit?
Decanting is designed to extend the terms of a trust or make it more safe for those involved. Those who are new beneficiaries may benefit most. This is because they receive new assets that can be used to alleviate health, personal or educational expenses. Also, beneficiaries will likely get exactly what was planned when establishing the trust. The new provisions of the law allow for assets to be better protected. Finally, since the trustee is required to provide 60 days notice prior to the exercise of the decanting power, beneficiaries have time to object to any proposed changes. Our advice is to have all parties entitled to notice sign and approve any trust decanting.
Are You Worried about Your End of Life Plan?
If you are not prepared with a current estate plan then your family could be vulnerable to higher tax bills, extensive legal fees, and familial conflicts. To avoid those obstacles you should visit an Estate Planning Attorney to get professional help, and create a plan that well suits your goals.
The Law Offices of Joel A Harris are located in the cities of Concord, Walnut Creek, and Antioch, California. We have worked for nearly 30 years giving the best guidance our clients need to protect their assets. Have a question about your planning your estate? Feel free to schedule a sit-down meeting where we are happy to patiently answer every question you may have. For your free consultation reach out to us at (925) 757-4605.
Sources
- https://www.uniformlaws.org/committees/community-home?communitykey=5b248bac-9251-47fb-bad8-57a23f3df540&tab=groupdetails
- https://www.lexology.com/library/detail.aspx?g=6f3a2428-28fd-4fd9-b851-9089efa03697
- https://www.calcpa.org/news/2018/12/20/asset-pouring
- https://www.americanbar.org/groups/gpsolo/publications/gpsolo_ereport/2018/september-2018/power-trust-decanting-part-1/