DECANTING
We all know the story. Mom and dad had their trust drawn up years ago. So much of the law related to estates has changed. So much of the law related to taxes has changed. And, so much of the family’s situation has changed. But, like most, mom and dad never sat down with their estate-planning attorney to do periodic reviews to ensure their estate planning documents reflected all of these changes. Indeed, the average individual or couple might see their estate-planning attorney once every ten years . . . if that.
Once dad died, his “bypass” trust became irrevocable. And, once his trust became irrevocable, that was it. It was set in stone. The family was now stuck with a trust that was not in tune with estate law, tax law, or the family’s circumstances. If they could only have a “re-do.”
The family might want to build in asset protection provisions into the trust. Perhaps the family would like to convert the bypass trust to a Dynasty Trust so as to extend its period outside the estate tax system. Alternatively, the family would like to convert a portion of the trust to a Special Needs Trust for a disabled family member. If only . . .
Enter a legal concept called “decanting.” The term is borrowed from those who consume fine wines. Typically, a fine wine is allowed to “breathe” after its bottle is opened. And, it is common to decant a fine wine from its original container into another container. Decanting of a trust is when the assets of one trust are poured into a new trust. The new trust has terms and provisions that reflect the updates in estate law, tax law, and the family’s situation.
About That Irrevocable Trust . . . Change It And Save Tax! – Forbes