Trust Decanting

Trust Decanting

Trust decanting is a legal process that allows a trustee to distribute the assets of an existing trust into a new trust with different terms. This process is often used to modify the provisions of the original trust in response to changing circumstances, beneficiaries’ needs, or changes in the law that may affect the trust.

Decanting typically involves the following steps:

1. Identification of the Original Trust: The trustee examines the original trust document to determine the powers granted to them, including whether they have the authority to decant the trust assets.

2. Creating a New Trust: A new trust is established with terms that may be more favorable or appropriate for the beneficiaries. This could include changes such as modifying the distribution schedule, altering the terms of how the assets are managed, or updating the beneficiaries.

3. Distribution of Assets: The trustee transfers the assets from the original trust to the newly created trust, effectively "decanting" the assets. This process is meant to preserve the integrity of the trust while allowing for necessary updates.

Example: Suppose a trust was created for a beneficiary who is now facing financial difficulties due to a divorce. The trustee may decant the original trust into a new trust that provides for more stringent asset protection, ensuring that the beneficiary’s inheritance is safeguarded from potential creditors.

In Texas, trust decanting is governed by specific statutes, allowing for greater flexibility in trust management. It’s essential for trustees to consult legal counsel to ensure compliance with state laws when considering decanting.