New York Estate Planning & Elder Law Blog
It is important to parents and grandparents who are engaged in estate planning to consider the various challenges that can arise. Failure to properly take these issues into consideration can result in estate plans being jeopardized. Fortunately, in these situations, it is possible to decant a trust. This article explores exactly what decanting is and some of the reasons why people to decide to decant a trust.
Decanting a Trust in New York
For many years, estate planning involved irrevocable trusts which mean that even if a trust creator’s situation changed, it was still impossible to modify the trust. In recent years, however, many states have created “decanting” statutes that allow broken trusts to be modified. During the “decanting” process, a person laces assets in an inadequate irrevocable trust into a new irrevocable trust that has more adequate provisions. The nature of decanting statutes changes between changes. In accordance with New York law, an authorized trustee who has unlimited discretion over principal located in trust has the ability to appoint these assets into another trust. To move trusts in this manner, a person is not required to obtain consent of the beneficiaries and can do so without a court order.
Reasons to Decant a Trust
Situations change, which means that it is sometimes understandable to decant a trust. In addition to wanting to make sure that adult children do not waste any assets they receive, there are a number of other situations in which it might be a good idea to decant a trust. Some of the most common reasons to decant a trust include:
- Changing the controlling law. Recent decisions in federal and state laws can weaken the purpose or function of a trust. Decanting a trust, however, allows the trust’s creator to change the laws controlling a trust.
- Correcting ambiguities or errors in a trust. While people strive to make sure that estate planning is always perfectly performed, each year many people discover that trusts either contain ambiguities or incorrectly written terms which means that assets are not transferred in the desired manner. In these situations, decanting a trust can be particularly helpful.
- Merging a trust. Some beneficiaries receive assets from multiple trusts. Decanting can be used in these situations to merge multiple trusts into a single trust.
- Special need recipients. If special need trusts established for a beneficiary are not adequately created, there is a significant risk that the government will be able to seize these assets. By decanting a trust, however, it is possible to modify a trust so it encompasses the terms of a trust that will protect these assets.
- Protecting trust assets. Trusts that fail to fully protect assets are at risk of becoming drained if collection efforts against a beneficiary is made. Decanting is frequently used to change the terms of a trust to increase protection from actions made by creditors.
Speak with an Experienced Estate Planning Lawyer
The concept of “decanting”is still new to many people and many estate planners are still discovering that opportunities exist to modify irrevocable trusts. Even though there are a number of significant estate planning obstacles that can arise, an experienced estate planning lawyer understands how to take all of these issues into consideration. Contact Ettinger Estate Planning today to schedule a free initial consultation.