Having worked hard to build your wealth, you know that taxes, divorce or litigation could eat away at your assets. While establishing an irrevocable trust can help you avoid unnecessary loss, circumstances may change over time, so your existing trust may no longer meet your needs.
Changing an irrevocable trust is often difficult or impossible, unless you decide to decant your trust according to New York law.
What is decanting?
Decanting refers to the process of transferring assets from an existing trust into a new trust with different terms. First, you establish a new trust, and then move the assets from the old trust to the new one.
You may think of it like pouring wine from one bottle into a new, better vessel. The new trust can have updated provisions tailored to your current situation and goals. You have the flexibility to make changes such as modifying beneficiary distributions, granting additional powers to trustees, or incorporating new investment strategies.
Why decant a trust?
There are various reasons to possibly decant your trust. State or federal laws may have changed, so your trust now contains outdated provisions that no longer suit your objectives. Your family dynamics, financial situation or personal preferences may have shifted since creating the original trust, necessitating modifications.
In addition, decanting can help you minimize taxes on trust assets by incorporating new strategies or taking advantage of changes in tax laws. Furthermore, a new trust can include enhanced asset protection features to shield your wealth from potential creditors or lawsuits.
Does decanting have limits?
Decanting a trust must follow the requirements of New York law, so you should observe any legal limits when attempting to decant an existing trust. For example, you cannot diminish or eliminate the income of the trust to current beneficiaries. They must continue to receive from the trust per the original terms of the trust.
While decanting a trust may involve complications, it is a method worth exploring if you want to change an irrevocable trust to fit your present asset-planning goals.