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What does it mean to decant a trust?

On Behalf of | Mar 29, 2024 | Estate Planning

Decanting a trust is a legal process through which assets from one trust are poured (transferred) into a new trust with different terms. This process allows trustees to modify or update provisions of an irrevocable trust provided that certain conditions are met.

The term “decanting” originates from the act of pouring wine from one container to another, often to remove sediment or aerate the wine. Similarly, decanting a trust involves transferring assets from an old trust into a new trust with more favorable terms. That can help the trust continue to accomplish what it was intended to accomplish.

When can you decant a trust in Florida?

Changes in the law have brought Florida more in line with other states in this issue. Since 2018, trustees (other than one who is a settlor or beneficiary of the trust) have largely been permitted to decant, so long as they have absolute power to invade the principal – even if that power is not expressly stated. In general, most trusts can be decanted unless the trust itself specifically forbids such actions.

Why would you decant a trust? There are many possible reasons to consider this action, but some of the most common include:

  • The need to update the provisions to align with current beneficiary needs
  • The need to address administrative burdens caused by the terms of the existing trust
  • The desire to take advantage of new opportunities for asset protection
  • A response to changing laws that affect the tax efficiency of the trust

If you’re a trustee and you feel like the trust that you’re overseeing could benefit from some changes, you may want to learn more about the options. A proactive approach can help you better discharge your fiduciary duty to the trust’s beneficiaries.