Irrevocable trusts allow grantors to remove assets from their estates. While these estate planning tools carry with them some tax and probate advantages, they have traditionally been difficult to modify or cancel without the permission of the beneficiary or beneficiaries. However, what are known as decanting laws have been passed in Ohio and other states that make changing irrevocable trusts far simpler.
Ohio’s decanting law, which was passed in 2012, allows assets placed into an irrevocable trust to be poured or decanted into second trusts with different terms under certain specified conditions. This could be a crucial option for trustees to have in situations where distributing large amounts of money to beneficiaries could do more harm than good and would no longer reflect the original wishes of the grantor. Decanting may be advisable when the assets placed into an irrevocable trust have grown significantly or beneficiaries have developed substance abuse problems that sudden large sums of cash could make life-threatening.
In addition to moving assets, decanting can also be used to set up second trusts that give beneficiaries powers of appointment, establish direct trusteeships with business or investment advisers or include special needs provisions. Trustees may also use this technique to correct errors discovered in the original trust documents or clarify ambiguously worded provisions.
Experienced estate planning attorneys may suggest using trusts for several reasons. Trusts avoid the public glare of the probate process, may provide significant tax benefits and generally give people far more control over how and when their assets will be distributed, but they can be extremely complex and should be drafted with great care. Attorneys may seek to avoid the need for decanting irrevocable trusts by going into depth with clients about their goals and structuring trusts that align with these aims.
Source: Ohio Revised Code, “Trustee’s power to make distributions in further trust”, accessed on Nov. 3, 2017