Palm City Decanting Irrevocable Trust
An irrevocable trust in Palm City is structured to make it difficult, if not impossible, to alter. Naturally, this sometimes results in an inflexibility that may become frustrating. Trusts sometimes lose their effectiveness or no longer meet the needs of the beneficiaries. In the past, the trustee of an irrevocable trust typically would have been unable to adjust the terms of the trust. However, when you decant a trust, you may find a solution to an outdated, ineffective irrevocable trust.
Emptying an Irrevocable Trust
Decanting a trust simply means using assets from an old irrevocable trust to fund a new trust. Essentially, the assets pour into the second trust leaving the old, unwanted provisions behind in the empty first trust.
Funding a New Trust
After decanting, the trustee has the power to use the principal from the first trust to fund a second trust. However, there are some restrictions. Under Florida law, the second trust:
- must have the same beneficiaries as the first.
- cannot reduce any vested interest from the first trust.
- may alter or retain the power of appointment granted in the first trust.
- can leave out a power of appointment granted in the first trust in some circumstances.
- may create or modify a power of appointment.
- may extend the term of the second trust beyond the first trust.
- can be used to create a supplemental needs trust for a beneficiary with special needs.
The new trust begins to function according to the terms of the trust document that created it. While the beneficiaries remain the same, the trust may:
- Move to a more tax-friendly state.
- Fix any errors in prior trust.
- Update obsolete provisions.
- Adjust the terms of the trust due to new laws.
Trust law can be complicated. Always consult with counsel before creating or altering any trust.
Learn More About Decanting Irrevocable Trusts
Irrevocable trusts provide significant benefits to many people. When an irrevocable trust has run its course, however, it may be time to decant it. It’s important to note that not all states allow you to decant a trust. Fortunately, Florida does allow for this process.
John Mangan is an experienced Florida estate planning attorney, who has been board certified in wills, trusts & estates by the Florida Bar. Call Law Offices of John Mangan, P.A. at 772-324-9050 to set up an appointment or use our online Contact Form.