Decanting an irrevocable trust?
California’s trust decanting statute allows for the transfer of trust assets from one trust to another. This process, known as “decanting” (think of pouring wine from an old bottle into a new one), provides the flexibility to change the terms of an otherwise irrevocable trust, to better meet the needs of the beneficiaries.
Prior to 2019, the only method for changing an irrevocable trust was a court petition (Probate Code §15403), or with the written consent of the settlor(s) and all beneficiaries (Probate Code §15404) which isn’t possible if the trust became irrevocable because of the settlor’s death.
The California Uniform Trust Decanting Act (CA Probate Code §§ 19501 et seq.) became effective on January 1, 2019.
Under the statute, “an authorized fiduciary” (usually the trustee or trust protector) of the original trust may pour the assets into a new trust, potentially changing the distribution schedule or modifying administrative powers. This can be done without the express approval of the beneficiaries, as long as proper notice is given to them (CA Probate Code §19507), and the changes do not conflict with any material terms of the original trust or contravene any law.
Private decanting?
As of this writing, 31 other states have decanting statutes, but only seven of them (including Nevada, Delaware, and Wyoming) do not require notice to beneficiaries. California requires notice.
Still, the ability to decant a trust can provide significant benefits to families, such as the ability to respond to changing circumstances or new tax laws, or remove barriers to asset distribution.
More info?
It’s important that the decanting process be performed by an experienced trustee, trust protector, or attorney to ensure compliance with California law and to minimize the risk of unintended consequences.
Trust decanting isn’t a perfect solution, but may very well be an excellent alternative to seeking a court petition to modify an irrevocable trust.
Got more questions? Call us (818.707.8200) to discuss your situation.
[For information only; may NOT be relied upon as legal advice.]