The Uniform Trust Decanting Act takes effect on January 1, 2019. It is an important advantage for California probate law. The decanting act gives estate planners more flexibility and more options.
In effect, the law allows trustees to pour assets from an old, irrevocable trust into a new trust, mostly without needing permission from courts or beneficiaries to give an advantage to the beneficiary (or beneficiaries) of the original trust.
Lawmakers called it decanting because pouring liquid from an old bottle to a new bottle (or decanter) leaves the unwanted residue of the original liquid behind. In this case, pouring the assets from an old trust into a new one leaves behind the undesirable part of the old trust. This new law gives families more planning options when they wish to change the terms of their original probate.
How can average people benefit from this law?
Some trusts need a reset because they contain errors. The new law provides a way to repair trusts that are, in a sense, broken.
Another benefit of the new law is people's situations and wishes change during their lifetime. Their current estate plan may no longer be relevant to their new circumstances.
An irrevocable trust is only as good as its ability to carry out the grantor's wishes for the beneficiaries in the best way possible. Due to evolving laws or an unexpected change in a beneficiary's needs, the grantor's plan may no longer be what he or she intended. For example, the death of a spouse, a remarriage, a change in a person's wealth or the constant changes in tax laws could each provide a reason to decant the old trust into a new one.
What steps decant a trust?
Some of the rules are:
- Only the trustee can decant the irrevocable trust. It can funnel into one or more new trusts, depending on the desired benefits.
- The trustee cannot change the original trust. He or she can only decant it into a new trust to better benefit beneficiaries.
- In California, the trustee may not need to go through the court system to decant the old trust into a new one, avoiding loss of time and the expense of a court hearing.
Each trustee or beneficiary of a probate plan should review this new law to find out whether it can provide more value.