The Rules Governing Irrevocable Trusts Are Changing

Pullman & Comley Trusts and Estates attorneys Lauren C. Davies and Danielle Erickson author the Financial Advisor article “The Rules Governing Irrevocable Trusts Are Changing,” exploring how recent legal developments are making it easier to update irrevocable trusts through a process known as “decanting.”

Traditionally, irrevocable trusts have been considered unchangeable once established, even in the face of drafting errors or unforeseen circumstances. However, as more states like Connecticut adopt versions of the Uniform Trust Decanting Act, trustees now have the ability to transfer assets from an existing trust into a newly drafted trust with improved terms, without court involvement and while honoring the original trust’s intent.

Lauren and Danielle explain that decanting can resolve issues such as outdated trustee provisions, missing successor appointments or the need to introduce a power of appointment. They note that even small but significant oversights can create real problems down the line, offering this example: “What if both the spouse and the independent trustee die without having chosen a successor? The trust now has no trustees and no way to select one. That’s a problem.” While decanting doesn’t allow for adding new beneficiaries, it offers flexibility to address administrative gaps and changing family dynamics. The authors also emphasize the importance of considering tax implications, perpetuity rules, and state-by-state variations. As more jurisdictions embrace decanting laws, the authors encourage financial advisors to understand this evolving tool to better support clients with long-standing trusts.

To read the full article, please visit the Financial Advisor website.