Decanting is a familiar process in winemaking as well as in chemistry. However, it is also a sophisticated process in estate planning.
Question 1: What is decanting?
Decanting is the process of transferring property from one trust to another. Specifically, the term applies when a trustee transfers property from one irrevocable trust to a new trust that has terms different than the original.
Question 2: Why is decanting useful?
The terms of an irrevocable trust are typically not subject to change. With decanting, a trustee has the ability to effectively change the terms even though he or she is doing so by transferring the property to a new trust that has new terms. In states that allow for decanting, this is one method a trustee can use to more effectively manage the trust without having to go before court to seek judicial permission to take certain actions. In states that don’t have decanting provisions, the trustee will probably have to get court permission to perform the decanting.
Question 3: When is decanting used?
There are wide range of situations in which a trustee can use decanting. Some common situations include: taking advantage of new laws, improve outdated trust provisions, address the new needs of the beneficiaries, or transfer the jurisdiction of the trust to a new state that has more favorable laws and tax provisions. In general, the trustee can only use decanting for the benefit of the trust beneficiaries.
Decanting can be a useful estate planning technique in updating existing sophisticated estate plans. However, this is not a do it yourself project. Consult with an experienced and qualified estate planning attorney.
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