Can you decant a trust?

While decanting a good bottle of wine may be familiar to many people, California recently enacted a law that allows a new type of decanting: trust decanting. California enacted the Uniform Trust Decanting Act on Sept. 14.

What happens when you decant a trust?

Essentially, decanting a trust is the exercise of a trustee’s discretionary power under a trust to make distributions to beneficiaries by distributing all of the trust assets to a new trust, for the same beneficiaries but with different, more desirable terms.

What does decanting mean in a trust?

What does it mean to decant a trust? Trust decanting is the process of pouring the assets of one irrevocable trust (the “original trust”) into a second irrevocable trust with more desirable terms (the “new trust”).

What is a decanting provision?

A method by which a trustee may remove or modify trust provisions from an irrevocable trust by pouring/distributing the trust assets from an old trust into a new trust.

What is a section 645 trust?

Well, a §645 election allows the executor of an estate and the trustee of a revocable trust to elect to treat the estate and the trust as one for tax purposes. Generally, estates have the ability to elect a fiscal year end or a calendar year end, whereas trusts default to a calendar year end.

How do you break a trust?

The first step in dissolving a revocable trust is to remove all the assets that have been transferred into it. The second step is to fill out a formal revocation form, stating the grantor’s desire to dissolve the trust.

Can trusts be dissolved?

As discussed above, irrevocable trusts are not completely irrevocable; they can be modified or dissolved, but the settlor may not do so unilaterally. The most common mechanisms for modifying or dissolving an irrevocable trust are modification by consent and judicial modification.