Irrevocable trusts are beneficial for estate tax purposes. They allow you to place your assets into a trust, potentially avoiding additional estate tax when it is time to pass on your estate. 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 according to the terms of the trust until the beneficiaries receive the assets. Unfortunately, circumstances often change in our lives. This can lead to wanting an adjustment to the terms of a trust(s) we previously created. An irrevocable trust(s) leaves us in a bind, as they are much more difficult to change and/or terminate. Without getting the Courts involved, the best method to adjust the terms of your irrevocable trust is by decanting it.
To further estate planning objectives, decanting a trust means (essentially) that the trustee of the irrevocable trust takes the trust assets and places them in a new trust with different terms. Unlike other states, New Jersey law does not have a statute that specifically addresses decanting. However, NJ courts have allowed decanting in situations where the transfer of assets to a new trust is for the benefit of an existing or new beneficiary. In such a case, the trustee completes the transfer voluntarily. Courts have allowed this based on language found in a majority of irrevocable trusts, which states that distributions may be made “to or for the benefit of an existing 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. Numerous New Jersey requirements must be followed. You must meet with an experienced estate planning attorney to assure that your decanting is successful and does not fail due to a simple requirement you are unfamiliar with. Please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office. 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.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Estate Planning and Trust Attorney