The trustee who manages an irrevocable trust is typically a competent, ethical person chosen by a grantor. They may also be a professional fiduciary. In either scenario, the trustee has a fiduciary duty to act in the best interests of the beneficiaries of the trust.
They generally need to follow the instructions of the grantor and make distribution as necessary, while simultaneously managing trust resources to maintain or optimize their values. In some cases, those administering an irrevocable trust, which is not changeable, may initiate a legal process to decant a trust. What does that process entail?
Decanting allows for changes
An irrevocable trust is not modifiable the same way that a revocable trust usually is. The decanting process is a much more complex way of achieving what grantors can readily do with a revocable trust.
After a significant change in circumstances, the trust as established may not function as the grantor intended. Perhaps a beneficiary died, or market conditions drastically altered the value of key assets. The trust may need to evolve to properly serve its intended purpose.
The trustee creates a new trust with slightly modified terms and transfers current trust assets to the new trust. The process is subject to numerous restrictions and is highly technical. Trustees intending to decant a trust, possibly at the request of the original grantor, may need legal guidance to ensure they meet all necessary legal standards.
Reviewing initial trust paperwork with a skilled legal team is often the first step toward a successful decanting process. An attorney can provide insight into the most effective means of altering an irrevocable trust to better protect the beneficiaries and achieve the intention of the grantor.
