What is Florida Trust Decanting?
Trust decanting is a legal term coined from wine decanting itself. This is a process whereby wine is poured (decanted) from one container to another to isolate the solid residue which is left behind. This residue is disposed of because it’s considered the unwanted bit of the mixture.
Similarly, trust decanting entails a trustee moving assets into a new trust from an old one, resulting in the termination of the old trust.
Reasons for trust decanting:
There is a multitude of factors that might lead one to take this route, and some of them include the following:
A change in state or federal laws may necessitate this course of action if the new policies undermine the objectives or strength of the trust. Decanting allows one to alter the governing rules to rectify such a situation.
Incorrect terms or ambiguities discovered later on can also be a reason for decanting a trust.
In cases where individuals benefit from several assets, decanting can serve to filter all the separate sources into one.
Creditors may turn to a trust to recover their debt from a beneficiary, and trust decanting can be done to bolster protection through the amendment of terms. This ensures immunity in such scenarios.
Revisions to the Florida decanting statute:
The state made a couple of changes to its decanting statues in 2018, further outlining the conditions for decanting a trust. As things stand, a trustee can decant if they:
1) If they have absolute power.
Absolute power means that a trustee’s control over the trust principal is discrete and sole, and it isn’t shackled to beneficiary support, maintenance, or health, among other ascertainable requirements.
2) If they don’t have absolute power.
Only recently, even trustees with limited authority can now decant. Limitations here entail ascertainable standards, such as those outlined above. Notably, though, the new trust provisions have limitations for the trustee.
3) If they want to create a supplemental needs trust.
This is basically a special needs trust for beneficiaries with some form of disability. If the initial trust wasn’t of this nature, the trustee could decant it in favor of this kind of trust.
However, Florida laws dictate that a trustee can’t do the following during decanting:
- Increase compensation beyond the stipulations of the initial trust
- Relieve himself or herself from the breach of trust liability
- Increase indemnification claims more than the provisions of the first trust
What do you need to know prior to decanting in Florida?
Not too long ago, having absolute power was an obligatory prerequisite.
However, recent revisions have rendered state law more flexible. A trustee with limited ability as a result of ascertainable standards can still decant.
Notification rules, meanwhile, have been tightened and reduced to a written notice affording a sixty-day deadline. However, that period may be shortened via a written waiver. The beneficiary in question can object to these changes during this window, acting on their legal rights to do so.
A further requirement when it comes to creating a new supplemental needs trust is that there needs to be proof of the beneficiary’s disability.
Trust Decanting in a nutshell.
The state has wholly broadened once-restricted decanting laws. Trustees now have avenues for remedying an undesirable or less-beneficial trust.
The general process of trust decanting requires the participation of qualifying parties and beneficiaries, in addition to a tax advisor and a legal team, to ensure the requirements of the law are upheld. If everything is in alignment, then trust decanting can save beneficiaries a lot of money.
If you are a trustee looking to decant a trust, be sure to get in touch with a good Florida probate lawyer like Attorney David A. Silverstone before setting anything in motion.