Historically, when a grantor established and funded an irrevocable trust, a grantor could not change the trust’s terms. Now, there is a technique called trust decanting for altering irrevocable trust terms.
Transferring assets from an established trust to a new trust with modified trust terms is trust decanting. The process is similar to decanting wine, where you allow the sediment to settle to the bottom of a decanter before pouring the wine into a new decanter or glass leaving the unwanted sediment in the original decanter.
Nevada is an ideal trust jurisdiction for decanting a trust and leads the U.S. in providing grantors and trustees with outstanding control and flexibility. In Nevada, decanting a trust does not require court approval expediting the process. Grantors often establish irrevocable trusts in Nevada to gain the most secure asset protection in the country. Trust decanting is a powerful solution for trusts in general, but especially for Nevada trusts.
Grantors and trustees have many reasons for executing trust decanting. However, the objective is always to modify and modernize a trust.
Nevada is universally recognized as a tier one trust jurisdiction. As one of 8 U.S. states with trust decanting statutes, Nevada holds many other attractive statutes for families, the most popular being Nevada Asset Protection, Nevada Tax Benefits, Dynasty Provisions, and Directed Trust statutes.
By statute, Nevada allows you to migrate your irrevovable trust from a different trust jurisdiction to Nevada and comprehensively take advantage of Nevada’s trust decanting statute. The trustee (or grantor) from the original trust may migrate to the new Nevada trust as well.
Nevada’s nexus (connection) requirements are minimal relative to competing trust jurisdictions. However, we encourage all families to seek professional counsel ensuring their trust’s connection to Nevada is significant enough for Nevada to be the governing jurisdiction.
While an existing trust may be utilized when decanting, we most often see families create a new Nevada trust to “pour” assets into. This second trust may be created by a trustee or a grantor and must meet Nevada mandates. The second trust may be entirely different than the original trust.
Assets from the original trust must be titled to the new Nevada trust, new appointments of trust roles need to be documented, and the new trust terms should be declared. Further, we recommend that all persons and partied involved in the new trust should be notified and aware of the trust modifications. Professional legal counsel is highly advised in assisting your decanting process.
Crawford Trust specializes in Nevada trusts. We are happy to provide you with more information and refer you to our vast network of attorneys and advisors if helpful to you. Don’t hesitate to reach out to us!