An irrevocable trust is forever, right? Well, not necessarily.
When a trust no longer seems to serve the purposes for which it was intended or the laws have changed in ways that no longer work well with the terms of the trust, an old trust can sometimes be “decanted” into a new one. Assets in the existing trust are then poured into the new trust.
Why would you decant a trust?
Ohio is one of the states in which decanting an irrevocable trust is possible. While the beneficiaries of the trust have to be given notice that the trust is to be decanted (and, therefore, given time to object), a trustee doesn’t necessarily have to have their permission.
Some of the most common reasons to decant a trust include:
- To reframe the distribution of assets to better protect them against unnecessary estate taxes by taking advantage of changes in tax and inheritance laws
- To give the trustee absolute discretion over distributions (and thus deny creditors and a beneficiary’s divorcing spouse the chance to take the money)
- To fix obvious errors, mistakes and ambiguities in the existing trust by creating a new one that is clear and error-free
- To move the trust into a jurisdiction that has more favorable tax laws or protections against creditors
- To update provisions so that successor trustees or successor beneficiaries can be named when the old trust doesn’t contain them
- To merge several trusts into a single newly-formed trust that’s easier (and cheaper) to administer
- To create separate trusts for each beneficiary, so that they can be more responsive to that person’s needs
Unfortunately, you may not be able to proceed with your plans easily if the beneficiary or another party with standing objects to the process. If you’re in a dispute over a trust, talk to an attorney as soon as possible.