Decanting

Also called: Trust decanting.

Where the statute uses it: Minn. Stat. § 502.851

What it means

Pouring an old trust into a new one, without a court and without the settlor. Minnesota’s section is headed “TRUST DECANTING,” and the power belongs to an authorized trustee — a defined term excluding a trustee who is the settlor, and a trustee who is or will become a beneficiary other than through a power of appointment held in a nonfiduciary capacity.

How far the terms can move depends on how much discretion the old trust gave.

An authorized trustee with unlimited discretion to invade trust principal may appoint part or all of the principal to a trustee of an appointed trust for, and only for the benefit of, one, more than one, or all of the current beneficiaries of the invaded trust, to the exclusion of any one or more of the current beneficiaries.

A trustee without unlimited discretion is held closer, under subdivision 4: the current beneficiaries of the appointed trust must be the same as the invaded trust’s, the successor and remainder beneficiaries the same, and the new instrument must carry the same distribution language.

The appointed trust need not be a different trust. Subdivision 1(b) lets it be the same trust with modified terms, without a new name or a separate tax identification number.

Neither route needs the consent of the settlor or of the persons interested in the invaded trust, and neither needs court approval, though the trustee may seek it on notice. What decanting needs is paper and time: a signed, dated written instrument, and 60 days from delivery of notice before the exercise takes effect, unless each person entitled to notice agrees in writing to an earlier effective date or waives in writing the right to object.

Where the word shows up

In a trustee’s letter enclosing a copy of a trust the beneficiaries never heard of. Subdivision 11(c) lists who must get that package: anyone with a right to remove or replace the trustee, all persons interested in the invaded trust — defined as all qualified beneficiaries under § 501C.0103(m) — and any person treated as owner of the appointed trust under sections 671 to 679 of the Internal Revenue Code.