Trust documents using out of date legislation or antiquated approaches can create frustrating challenges for families and advisors. Other times, changing family dynamics or health circumstances can render a trust ineffective in meeting the needs of a beneficiary. Fortunately for clients facing such challenges, Cumberland Trust is based in one of the most trust-friendly states in the U.S. and has the flexibility to deal with such situations.
In these situations, Cumberland Trust and a family’s estate planning attorney may choose to decant the trust. Decanting is a process whereby assets from an irrevocable trust are moved to a new irrevocable trust with updated provisions. Common reasons for decanting a trust include:
- asset protection or tax strategies
- postponing outright distributions (e.g., due to a disability or mental health diagnosis)
- complicated family dynamics
- granting a power of appointment
- modifying administrative provisions
With the ever-evolving changes in regulations, decanting a trust to more favorable terms can be a beneficial practice.
“Through decanting, a trust’s term can be extended which can protect it from unnecessary estate taxes, as well as creditors and divorcing spouses, considerations that are especially important in light of shifting laws,” said Alex Gillott, Vice President and Director of Personal Trust Administration at Cumberland Trust. “You can decant for a reason like moving assets to a dynasty trust to last for multiple generations or for even simpler reasons like fixing drafting errors or clarifying ambiguous terms.”
Over the past 15 years, decanting has become a more common practice in trust-friendly states. Tennessee’s decanting statute provides attorneys, families, and trustees the ability to adapt to changing family or legislative situations. Notably, Steve Oshins, a nationally recognized expert on trust law, has ranked Tennessee’s decanting statute as the third most favorable in the country.
“It makes sense to have your trust in a flexible state like Tennessee,” Gillott added, “and that’s a big reason why Cumberland Trust is based here and able to help so many individuals and families across the U.S.”