Many people may be under the impression that irrevocable trusts cannot ever be modified or revoked by the grantor. However, this becomes problematic when an irrevocable trust becomes outdated or is deficient in some other way as time goes by. Is the “irrevocability” of an irrevocable trust absolute? Not always.

Many states, including Minnesota, have decanting statutes in which assets in an outdated or problematic irrevocable trust can be poured into a new, more suitable, irrevocable trust. The exact requirements for decanting a trust vary by state. However, there are good reasons why an irrevocable trust should be decanted.

One reason is to extend the term of the trust. The grantor might want to create a dynasty trust that would keep assets for future generations. Or, the grantor might wish to change mandatory distributions in the trust to discretionary distributions to protect the assets from creditors. Sometimes, there is a drafting error in the original trust that needs to be fixed. A grantor may also want to use decanting to change which state law governs the trust. In addition, a grantor might wish to combine two or more trusts together to make trust administration simpler.

Decanting is a relatively new option for trusts, so it remains to be seen exactly how decanting statutes will be developed and utilized to modify trusts that were once thought to be non-modifiable. Readers who want to determine if decanting is an option for them will want to discuss their situation with an estate planning professional.


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