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Irrevocable Trusts: Not as Irrevocable as You Might Think

Irrevocable Trusts: Not as Irrevocable as You Might Think

Very often, careful estate planning includes irrevocable trusts for tax advantages. Such trusts can hold many types of assets such as businesses, investments, life-insurance policies, and even cash. Upon death, the Trust is passed on without estate taxes. These tax advantages are available because the creator of the Trust, the Grantor, gives up control of the Trust. This is why the Trust is called irrevocable.

The circumstances and environment where a Trust is created, however, are not always held constant throughout the life of the Trust. Life situations change, tax laws change. The value of the assets in the trust may even change. It is often desirable to alter the provisions of an Irrevocable Trust. The law, of course, provides many avenues by which Irrevocable Trusts can be changed or even revoked.


Historically, modifying an Irrevocable Trust required a long process including a potentially costly trip to court - along with all the publicity that would entail. More recently, some states have introduced laws that allow Decanting an Irrevocable Trust. This is a process where the assets of the existing Trust are moved to a new Trust - figuratively pouring the assets into a new vessel.

Decanting can be handled without court involvement, making it a much quicker, less costly, and more private way to handle modifications to Irrevocable Trusts. Decanting allows changing certain terms of the Trust arrangement. For example, the age at which the Beneficiary receives a payout may be increased. This can also make it easier to name a new Trustee, or change the duties of the Trustee - for example, splitting the duties among several parties.

What You Can't Do

Decanting is not unlimited, of course. It is not possible to change the vested assets of a Beneficiary. Also the new Trust does not have to include all Beneficiaries of the original trust, but it may not add Beneficiaries. It is also required that the new Trust maintain terms and conditions that are consistent with the tax advantages provided by the original Trust.

Contact us to learn more about how Irrevocable Trusts can protect your estate.