Trusts are designed to provide long-term flexibility and protection. But sometimes, an older trust no longer works as well as it should.

Maybe the trust was created years ago and the family's circumstances have changed. Perhaps the trustee wants to modernize the trust, improve its administration, add better protections for a beneficiary, or address changes in tax or benefits planning.

In some circumstances, trust decanting can provide a solution.

What Is Trust Decanting?

Trust decanting is a legal process that can allow a trustee to distribute assets from an existing trust into a new trust with updated or modified terms.

Think of it like moving the contents of an old bottle into a new bottle. The assets remain in trust, but the governing terms may be updated to better fit the family's current circumstances.

Decanting does not necessarily mean that a trust was drafted incorrectly. Even a well-drafted trust can become outdated as circumstances change.

For Oklahoma families, the Oklahoma Decanting Act provides a statutory framework for certain trusts to be decanted.

Why Would Someone Decant a Trust?

There are a variety of reasons a family may consider decanting.

Updating an Older Trust

Estate planning laws, family circumstances, and planning goals change over time. A trust created many years ago may contain provisions that are no longer ideal.

Decanting may provide an opportunity to update certain provisions without starting completely over.

Providing Additional Protection for Beneficiaries

A beneficiary's circumstances may change after a trust is created.

For example, a beneficiary may develop financial difficulties, receive an inheritance, become involved in a divorce, or develop a disability. Depending on the terms of the original trust and the applicable law, decanting may allow additional protections to be incorporated into a new trust.

Special Needs Planning

Decanting can be particularly interesting when a beneficiary has a disability or receives means-tested government benefits.

Oklahoma's decanting law contains specific provisions addressing trusts for beneficiaries with disabilities. In the right circumstances, decanting may allow trust assets to be moved into a trust designed to better preserve eligibility for government benefits.

This area requires careful analysis because the rules governing special needs trusts and public benefits are highly specific.

Changing Administrative Provisions

Sometimes the problem with an older trust isn't who receives the money—it's how the trust is administered.

A decanting may, depending on the circumstances, provide an opportunity to address provisions concerning trustees, trust administration, distributions, and other operational matters.

Does the Beneficiary Have to Agree?

Not necessarily.

One of the significant features of Oklahoma's decanting law is that a qualifying decanting can occur without the consent of the beneficiaries or court approval when the statutory requirements are satisfied.

However, notice requirements and other statutory limitations still apply.

Decanting is therefore not simply a matter of a trustee signing a new trust and transferring the assets. The trustee must determine whether the original trust qualifies, whether the proposed decanting is permitted, and whether the statutory requirements have been followed.

Can Every Oklahoma Trust Be Decanted?

No.

Whether a trust can be decanted depends on several factors, including the language of the existing trust, the trustee's powers, the type of trust, the interests of the beneficiaries, and the proposed terms of the new trust.

Oklahoma's Decanting Act contains different rules depending on the trustee's discretionary authority and the circumstances involved.

There are also limitations on what can and cannot be changed through decanting.

That means decanting should not be treated as a one-size-fits-all solution.

Decanting vs. Amending a Trust

Decanting and trust amendments can accomplish some similar goals, but they are different legal mechanisms.

An amendment generally changes the existing trust according to the amendment provisions contained in the trust document and applicable law.

Decanting instead involves using the trustee's authority to distribute trust property into a second trust with different terms.

Which approach makes sense depends on the circumstances.

In some cases, an amendment may be simpler. In others, the original trust may be difficult or impossible to amend, making decanting worth considering.

What About an Irrevocable Trust?

Decanting can be particularly valuable when dealing with irrevocable trusts.

An irrevocable trust generally cannot simply be changed because the family wishes to change it. Depending on the trust and applicable law, however, other modification mechanisms—including decanting—may be available.

This is one reason it is important to review the actual trust document before deciding that an irrevocable trust is permanently stuck with its original terms.

What Should a Trustee Do Before Decanting?

A trustee considering decanting should generally begin with a careful review of:

• The existing trust agreement and all amendments
• The trust's governing law
• The trustee's distribution and discretionary powers
• The identities and interests of the beneficiaries
• The proposed terms of the new trust
• Applicable notice requirements
• Tax considerations
• Government-benefit considerations, when applicable
• Any restrictions imposed by the Oklahoma Decanting Act

The trustee should also document the reasoning behind the proposed decanting and make sure the transaction is consistent with the trustee's fiduciary duties.

Decanting Can Be Powerful—But It Is Not Automatic

Trust decanting can give Oklahoma families and trustees another tool for dealing with an outdated or problematic trust.

But the fact that Oklahoma has a decanting statute does not mean that every trust can be decanted or that every provision can be changed.

The details matter.

If you have an irrevocable trust that no longer fits your family's circumstances, don't assume that the only options are to leave the trust unchanged or go to court. Decanting may be one of several potential solutions worth exploring.

Considering Trust Decanting in Tulsa?

At Morris Ratcliff Law, we help Oklahoma families understand their estate planning options and determine whether their existing documents still accomplish what they intended.

If you have an older irrevocable trust, a trust involving a beneficiary with special needs, or a trust with trustee or administrative provisions that no longer work well, a review of the existing trust may reveal options that you did not realize were available.

Contact Morris Ratcliff Law to discuss whethertrust decanting in Oklahoma may be appropriate for your situation.

Call us today!