Monthly Archives: February 2025

When I began practicing law, clients created irrevocable trusts with caution because the trust was then set in stone. Now, clients are creating irrevocable with more frequency and considerably less caution because changing irrevocable trusts became commonplace. Trusts and Estate practitioners have numerous options to consider if they want to change an irrevocable trust. The first part of this three-part series explored changes to irrevocable trusts using judicial or nonjudicial modification Are Irrevocable Trusts Really Irrevocable – Part I. This second part examines decanting, and the final part in the series reviews the use of a Trust Protector to modify an otherwise irrevocable trust.

Unlike judicial and nonjudicial modification or the use of a Trust Protector, decanting relies upon powers that already exist in the trust. When the Trustee decants, the Trustee exercises their power to distribute trust assets and moves the assets from the existing trust with unfavorable terms to a new trust containing more favorable terms, much like pouring wine from the bottle into a decanter brings better flavor to the wine.

State laws differ considerably in the changes permitted in the new Trust. The new trust could provide the opportunity to correct a drafting mistake, clarify ambiguities, correct and update trust provisions, remedy problems in administration, change trust situs, expand or limit trustee powers, restrict beneficiaries’ rights to information, provide asset protection, adjust trustee succession, appoint a trust protector, alter distributions, or adapt trust provisions to address changes in beneficiaries’ circumstances depending upon the laws of the state in which decanting occurs. Over half of all states have enacted statutes authorizing decanting. Each state’s statutes regarding decanting vary widely, although most recognize that if a trustee has discretionary power to distribute trust corpus to the beneficiaries, such power constitutes a special power of appointment enabling the trustee to appoint the trust corpus to a new trust for the benefit of those same beneficiaries. That’s not the end of the inquiry, though.

Even if your state statutes do not specifically authorize decanting, you may still have options. Some states recognize a common law right to decant. Others allow inclusion of the authority to decant in the terms of the trust itself. Finally, even if none of the foregoing apply, you could consider changing the situs of the trust. The trustee or another authorized party can utilize a change in situs provision to move administration of the trust to a state that allows decanting. Once the trustee changes situs, then the trustee can take advantage of the new state’s decanting statutes. Most states that allow decanting have adopted some form of the Uniform Trust Decanting Act. Note that experts tend to cite South Dakota as the state with the most favorable decanting statute.

This article begins to scratch the surface of the issues involved with decanting. Decanting adds another option to solve trust troubles, although it’s vital to consult with me regarding applicable statutes, trust provisions, both in the original trust and the new trust, tax implications, notice, consent, and Trustee powers and fiduciary duties. Note that if a Trustee occupies the dual role of Trustee and beneficiary, that complicates things.

Decanting provides a great estate planning opportunity in the current environment. Clients are encouraged to review their plans, especially irrevocable trusts created many years ago to confirm that those trusts accomplish the goals of the grantor and properly protect the needs of the beneficiaries. If the trust fails to properly address beneficiary needs or otherwise could use some tweaking, decanting provides a great opportunity to re-write the trust with more favorable terms.

The final article in this series will explore using a Trust Protector to remedy defects in an irrevocable trust or provide more favorable terms.

When I first began practicing law, I remember cautioning clients about the detriments of creating an irrevocable trust. The trust provided great benefits but came with a significant downside – irrevocability with no way to make changes should the need arise and you give up the constructive and legal ownership of the assets that you transfer to the trust. The landscape regarding planning with irrevocable trusts changed significantly. Often, I counseled that “irrevocable trusts aren’t really irrevocable” and meant it. Now, clients have numerous options to consider if they want to change an irrevocable trust. This first part of a three-part series explores changes to irrevocable trusts using judicial or nonjudicial modification. The second part examines decanting, and the final part in the series reviews the use of a Trust Protector to modify an otherwise irrevocable trust.

Clients often think that an irrevocable trust means that the terms of the trust have been set in stone and that there’s no room to modify, amend, or terminate the trust without spending a significant amount of money. That usually involved obtaining an order from a judge after having spent significant money on attorneys’ fees. While that may have been true years ago, that’s no longer the case. Anyone desiring to modify an irrevocable trust has several options to consider.

For the thirty-six states that have enacted the Uniform Trust Code (“UTC”), section 411(a) allows a trustee, beneficiary, or the grantor of the trust to bring an action to modify such trust if the grantor and all beneficiaries agree, even if the modification violates a purpose of the trust. This powerful provision allows the parties to re-write the trust if everyone approves. Section 411(b) of the UTC allows modification without the grantor’s consent which gives the beneficiaries the ability to override the wishes of the individual who created the trust if they can convince a judge that the modification is not inconsistent with a material purpose of the trust. That’s powerful. This means that even if the grantor has died, the beneficiaries may change the trust. Finally, Section 411(e) of the UTC allows modification over the objection of a beneficiary if such modification is not against a material purpose of the trust and if adequate protections exist for the objecting beneficiary.

Even in the fourteen states that have not enacted the UTC, it may be possible to bring an action to modify an irrevocable trust. Some non-UTC states have statutes like those of UTC states and allow modification if the objecting party has adequate protection. Further, even if the non-UTC state lacks a modification statute, that doesn’t preclude moving jurisdiction of the trust to utilize a statute in another state to commence modification. Of course, the trust either through the trustee or the beneficiaries needs to have sufficient connection with the new state to avail itself of that state’s statutes.

For those looking for a less expensive and faster way to modify trusts, section 111 of the UTC allows interested persons to enter a nonjudicial settlement agreement (“NJSA”) as to any matter involving a trust. The agreement cannot violate a material purpose of the trust and must include terms and conditions that a court could otherwise approve. The UTC limits the matters resolved by an NJSA; however, interested parties have broad latitude in the use of an NJSA to resolve trust matters. Some non-UTC states such as Delaware, Idaho, Illinois, and Washington have adopted statutes allowing use of NJSAs. Here again, motivated beneficiaries in states without NJSA provisions may move the trust to a state with such provisions provided sufficient contacts exist.

For UTC and non-UTC states alike, multiple options exist to modify an irrevocable trust. Given the current high exemption and potential changes to the tax code, now is a great time to review existing estate plans that include irrevocable trusts. Exploring nonjudicial modification can add flexibility to those trusts to account for changed circumstances. Experienced Estate Planning attorneys know how to review proper statutes, determine the necessary parties, and understand the permissible modifications. NJSAs provide just one of several methods to modify an irrevocable trust giving beneficiaries an opportunity to achieve tax benefits, provide asset protection, as well as other benefits.

The next article in this series will explore how decanting provides another nonjudicial remedy to defects in an irrevocable trust or provides better terms.