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Fixing Old Trusts and Exploiting New Opportunities

By Thomas O. Katz




         Many planners confront situations involving clients who have created one or more irrevocable trusts that, for any number of reasons, no longer reflect the clients' objectives. For example, the existing trust may provide for outright distributions to a beneficiary and the clients may have concerns as to the property passing outright to a beneficiary that is too young, or who is currently experiencing creditor issues, going through a divorce or receiving government benefits. Alternately, changes in the tax law may cause provisions that were previously thoughtto be appropriate and beneficial when the trust was initially drafted to have unforeseen negative tax implications. Florida's recently enacted “decanting” statute (Section 736.04117) provides what many advisors correctly see as an invaluable mechanism to help ensure that the clients' objectives are achieved. As the name implies, it can be pictured like decanting wine – pouring the assets of one trust into another trust. It is not applicable to all trusts, and the terms and conditions of the trust must be carefully analyzed to ensure that the statute can be used (basically, only when the trustee has the absolute power to invade principal).

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Broward County Inspiring Philanthropy over 25 years