Creating a trust is a major step in setting up an estate plan. This legal tool allows you to set terms for specific assets to be passed to the beneficiaries you choose. One type of trust that you may establish is an irrevocable trust, which is one that can’t be changed or cancelled unless you have the permission of the court or all beneficiaries.
Some people may not want to set up an irrevocable trust because of the permanency, which doesn’t allow the trust to adapt to changes in laws or situations. California law allows for irrevocable trusts to be decanted. This means that the assets of the trust can be transferred to a new trust with updated terms, such as an extension in the lifetime of the trust or increased beneficiary protections, but this can only be done in specific situations.
Requirements for decanting a trust
California Probate Code Section 19502 allows trustees to decant a trust if they have discretionary authority over the trust’s principal distributions. The material purpose of the trust can’t be violated during the decanting process. The trustee must act in good faith and can’t eliminate or add any new beneficiaries to the new trust. The original trust’s terms for special needs provisions or charitable interests must remain the same.
The trustee must notify all beneficiaries and any co-trustees at least 60 days before the trust can be decanted. During that waiting period, the interested parties can raise concerns or object to the change.
Decanting a trust can offer a little more flexibility than what’s possible without it. The process is complex and must be handled precisely, so it may be beneficial to work with someone familiar with these matters.
