Illinois Estate Planning and Elder Law Blog
A trust is a legal document that you can use to give assets to others. A trust can be revocable or irrevocable. As the creator of the trust, you can modify a revocable trust at any point throughout your lifetime. If you decide on an irrevocable trust, though, you generally will be unable to make changes to this type of trust after you have created it.
A lot of people are concerned about the term “irrevocable” since they associate this term with permanency and are afraid that this type of trust could turn out to no longer be compatible with their wishes as their life circumstances change. There is, however, a way to deal with changes in life circumstances after the creation of an irrevocable trust using “trust decanting.”
What Is “Decanting” a Trust in Estate Planning?
“Decanting” in this context is the process of starting with an existing irrevocable trust, creating a new trust with the desired terms and provisions, and moving the assets of the initial trust to the new trust.
Decanting a trust can be useful for a number of reasons, one of the most common being to correct drafting errors that were made in the original trust document. In some cases, changes may also need to be made to better reflect the grantor’s intentions for the trust if there are any misunderstandings about what the grantor intended.
Other reasons for decanting a trust may include modifying the administrative provisions of the trust, combining two trusts in order to maximize administrative efficiency, or to take advantage of investment opportunities. Often there is simply change of circumstances that hadn’t been considered when the trust was first created.
Here are some common situations where decanting may be useful:
· A change in the legal jurisdiction of the trust is desired in order to enable more liberal investment or asset management powers.
· A change in jurisdiction is desired due to more simplified trust administration rules or more advantageous income tax treatment.
· A grantor wishes to move to a different jurisdiction, such as to where trust disclosure is less onerous or to one that allows more privacy.
· A grantor/settlor wishes to change a beneficiary designation or the age of when a beneficiary comes into control of assets
· A grantor/settlor wishes to modify the terms of trusteeship in order to change their succession order, investment powers, how they are compensated, or to create a power to remove trustees.
· A merging of multiple trusts can be done to reduce costs and create a better management structure.
· A trust termination date may need to be extended in order to protect one or more beneficiaries.
Consult With an Estate Planning Professional
There are a number of factors to consider before deciding to decant a trust. Decanting is an advanced estate planning technique that typically requires the assistance of a qualified attorney. In some jurisdictions, if an irrevocable trust is unable to be decanted, it may be possible to modify the trust through the court process or to convert it to a unitrust.
For help with your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.
https://www.elderlawanswers.com/modifying-an-irrevocable-trust-through-trust-decanting-19799