Decanting a Trust: What does that Involve?

Decanting a Trust: What does that Involve?

When you are administering a trust and discover that the trust contains errors which make it cumbersome to administer or have instructions that you know the original drafter intended, you may wonder what it is you can do to remedy the situation. The answer to this question is likely that you need to decant the trust. But how do you do that?

Decanting a trust is a relatively straightforward process but does have very important steps that must be followed. It is important to first understand where these rules and requirements come from. 760 ILCS 3/1201 is the section of Illinois Statutes which discusses trust decanting and should be followed exactly.

When first determining whether you can decant the trust you should understand what part of the trust you are seeking to amend. If you are looking to change who the beneficiaries are, how much anyone receives, or what specific assets are given to who, STOP, as this is not a valid reason to decant a trust.

Decanting a trust is for the purpose of making the trust easier to follow and administer and to make sure that, despite the changes, the wishes of the deceased are ultimately being adhered to. A valid reason to decant a trust could be to remove the need for multiple trustees should that requirement ultimately be a serious hinderance to the effective distribution of the property. Trusts can sometimes be written when a person is at different stage in their life and the instructions, they left behind in their trust may not necessarily be as applicable to their situation as they were when they were first written. Often a settlor will update their trust throughout their life but life, as we all know, can end unexpectantly and there are plenty of times where a settlor intended to alter his trust instructions and everyone was aware of this intent but the settlor simply did not manage to fit in the time to do so before their unexpected passing.

If you are confident that you are decanting the trust for the correct reasons, you should make sure you are following the correct steps. The first step is to ensure all relevant parties are notified. To do this, you must prepare a notice to:

(1) each settlor of the first trust, if living or then in existence;
(2) each qualified beneficiary of the first trust;
(3) each holder of a presently exercisable power of appointment over any part or all of the first trust;
(4) each person that currently has the right to remove or replace the authorized fiduciary;
(5) each other fiduciary of the first trust;
(6) each fiduciary of the second trust; and
(7) the Attorney General’s Charitable Trust Bureau, if the first trust contains a charitable interest.

To be valid the notice must:

(1) specify the manner in which the authorized fiduciary intends to exercise the decanting power;
(2) specify the proposed effective date for exercise of the power;
(3) include a copy of the first-trust instrument; and
(4) include a copy of all second-trust instruments.

After this notice is sent out to all parties the party wishing to decant the trust must wait for a period of 60 days from the date the notice was sent out. Within that time any of the recipients of the notice will have the opportunity to challenge this use of the decanting power. If they do so, they must submit an application to the court to either approve or deny the application. The application alternatively may request that specific instructions be imposed by the court for the decanting or that a special fiduciary be appointed to either oversee the decanting or to determine if it is needed at all.

If you have trust you are administering that you would like to potentially decant, consider calling the Law Offices of Andrew Szocka P.C. at 815-455-8430 or by emailing us at info@szocka.com. Additionally, if you have a trust document drafted which you want to ensure is written correctly and won’t be in need of decanting, we would be happy to review it for you.  We are a well-established Crystal Lake firm with extensive experience in wills, trusts, and all aspects of estate planning. We would love to meet with you and discuss your long-term goals for your family!

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