It used to be very difficult for beneficiary’s to change the terms of previously-established trusts, and if they were able to make the changes at all, it could be quite costly. But through a process known as “trust decanting,” trustees can “pour” the assets from an older, less-desirable trust into a new one. This essentially allows beneficiaries to change or rearrange the structure of the trusts.

Many states have enacted decanting statutes in the past few years, and there has been a corresponding increase in interest in decanting and changing trusts. Here’s what Mark Harder, Partner at Warner Norcross & Judd LLP and a featured speaker at the 2015 FOX Financial Executives Forum, recently had to say about trust decanting:

There are a variety of different ways you can modify trusts—decanting is just one of them—depending upon what state you’re located in (or what state you want to go to if you’re looking to take advantage of its local laws.) At this point, there isn’t a “uniform decanting statue,” so it really does vary state-to-state. Take, for example, my home state of Michigan. We have two different decanting statues, each of which works very differently from the other and aims to accomplish different objectives. One statute is primarily designed to facilitate changes to the administration and governance systems of the trust, and is part of the Michigan Trust Code. However, you can’t use it to modify or change beneficiaries, or change the shares of beneficiaries or distribution provisions. The other statute is part of our Powers of Appointment Act and allows much broader changes...but it is only available if the trust is a discretionary trust.

Not all states have multiple decanting statutes. Many families take the time to seek out a state with more accommodating statutes than their own. South Dakota, Nevada, Tennessee and Alaska are among those states considered to have some of the best decanting laws.

So while decanting isn’t always going to be an option, it is worth looking into if you want to change the terms of an existing trust.

Mark and Brittney Saks, National Leader of Personal Financial Services at PwC Private Company Services, discussed decanting and other tax and estate trends at the 2015 FOX Financial Executives Forum, July 21-22 in Chicago. Click here to learn more.

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Mark K. Harder, Partner, Warner Norcross & Judd LLP

Mark K. Harder is a partner with the law firm of Warner Norcross & Judd LLP and serves as Chair of the firm’s Family Office Group. He concentrates his practice in estate planning and administration for high net worth individuals and in the representation of family owned businesses and their owners. 

Mr. Harder is a Fellow in the American College of Trust & Estate Counsel and is listed in Best Lawyers in America and Michigan Superlawyers. He was named 2010 Lawyer of the Year for Trusts and Estates in Grand Rapids, Michigan by Best Lawyers in America and was recognized as a 2010 Thought Leader in the Law by the West Michigan Business Review.

He served as Chair of the State Bar of Michigan’s Probate and Estate Planning Section and was the Chairman and Reporter for the Michigan Trust Code Committee. He also is the co-author of Estates and Protected Individuals Code with Reporters’ Commentary published by the Institute for Continuing Legal Education and is an active speaker for the Institute of Continuing Legal Education and other professional organizations.