By Fredrick P. Niemann, Esq. a NJ Estate Planning and Trust Attorney
Irrevocable trusts are beneficial for estate planning tax purposes. They allow you to place your assets into trust and therefore avoid the estate tax involved when it is time to pass on your estate, along with other tax benefits. However, these tax benefits are not without a price. When you place your assets into an irrevocable trust, you are generally not allowed to modify the terms of the trust anymore. You no longer own the assets. The trustee of the trust will manage the assets and terms of the trust until the beneficiaries receive the assets. Unfortunately for us, circumstances often change in our lives. This can lead to an adjustment in our desires as to the terms of the trust we created. Irrevocable trusts leave us in a bind however, as they are much more difficult to change the terms of. Without getting the Courts involved, the best method to adjust the terms of your irrevocable trust is by decanting it.
For estate planning objectives, decanting a trust essentially involves the trustee of the irrevocable trust taking the assets and placing them in a new trust with different terms. This is arguably the most flexibility one will receive when placing assets in an irrevocable trust. Unlike other states, New Jersey law does not have a statute that specifically addresses decanting. However, the NJ Courts have allowed decanting in situations in which the transfer of assets to a new trust was for the benefit of the beneficiary and in which the trustee completed the transfer voluntarily, not under any directions or stipulations. Courts have allowed this based on a clause that is placed in the majority of irrevocable trusts, which states that distributions may be made “to or for the benefit of a beneficiary”. Therefore, if the distribution to the new trust is for the benefit of the beneficiary, it will likely be allowed assuming certain specific requirements are followed.
Decanting a trust is a very complicated process. There are numerous New Jersey requirements that must be followed. It is important you see an experienced estate planning attorney to assure that your decanting is successful and does not fail due to a simple requirement that you are unfamiliar with. Please call Fredrick P. Niemann, Esq. today toll-free at 855-376-5291 or email him at email@example.com/. Mr. Niemann is an experienced, knowledgeable trust and estate planning attorney and would be more than happy to discuss any trust or estate planning matter you may have.