In the world of estate planning, irrevocable trusts are seen as rigid, unchangeable instruments – hence the term “irrevocable.” Once created, their terms were typically set in stone. However, thanks to evolving legal frameworks, a process known as trust decanting is offering trustees and beneficiaries a powerful tool to adapt these trusts to changing circumstances.
What Is Trust Decanting?
Trust decanting is transferring assets from an existing irrevocable trust into a new trust with updated terms. This legal method is referred to as “pouring the asset of one trust to another.” This process allows for modifications without needing court approval or beneficiary consent in many cases, depending on the jurisdiction and the trust’s terms.
Why Decant a Trust?
There are several reasons why decanting might be considered:
- Correcting errors or ambiguities in the original trust document.
- Changing trustees or trust situs.
- Enhancing asset protection or adding spendthrift clauses.
- Adapting to tax law changes or optimizing for tax efficiency.
- Provide for a special needs beneficiary without jeopardizing government benefits.
- Merge multiple trusts for simplicity and efficiency – and to reduce administrative costs.
- Adding a power of appointment
- Changing or adding successor trustees
Legal Landscape in 2025
As of 2025, over 20 states have adopted the Uniform Trust Decanting Act (UTDA), a model law created by the Uniform Law Commission to standardize decanting procedures.
States like South Dakota and Nevada are known for their flexible decanting laws, while others like Delaware and Alaska impose stricter requirements.
Some states, such as New York, have their own decanting statutes independent of the UTDA. Modifying a trust may still be possible in states without decanting laws but typically requires court involvement and unanimous beneficiary consent. The most important thing to note is that each state has its own requirements when it comes to notifying beneficiaries and obtaining consent.
Where Do I Start?
- Trust Agreement: the original trust document should be thoroughly read by an estate planning attorney or advisor who specializes in trust administration.
- Determine Authority: The trustee must confirm they have the legal authority to decant, either through the trust document, state statute, or common law.
- Draft the New Trust: A new trust is created with the desired changes, ensuring it aligns with the original trust’s intent. This is vital.
- Transfer Assets: The trustee transfers the assets from the old trust to the new one.
- Notify Beneficiaries: Depending on the jurisdiction, beneficiaries may need to be notified or give consent.
- Document the Process: Proper documentation is essential to protect the trustee from liability and ensure compliance with fiduciary duties.
- EIN: as long as the new trust is a continuation of the old trust – no new EIN is necessary.
Risks and Considerations
- Tax Implications: Improper decanting can trigger gift, estate, or income tax consequences.
- Fiduciary Duty: Trustees must act in good faith and in the best interests of the beneficiaries.
- Legal Challenges: Beneficiaries may contest the decanting if they believe it alters their rights unfairly.
Trust decanting is a sophisticated but increasingly accessible tool for modern estate planning. It offers a way to breathe new life into old trusts, ensuring they remain effective and relevant in a changing legal and personal landscape. However, due to its complexity, decanting should always be undertaken with the guidance of experienced legal and tax professionals.
Contact Us
For more information on this topic, please contact a member of Withum’s Private Client Services Team.
