Irrevocable trusts are now subject to varying degrees of amendment by court approved modifications, trust protector actions, private settlement agreements, and, of course, decanting.
Effective July 1, 2013, Wyoming will become the nineteenth state (and the ninth state since 2010) to permit trust decanting by statute. Decanting refers to the distribution of trust property of one trust to a second trust. Historically, the availability of decanting and its limitations were not clearly defined by case law. Today, state statutes are filling this void by expressly authorizing decanting within clearly defined boundaries.
While the ability to modify an irrevocable trust provides great flexibility for planners, such modifications should not be made without careful consideration and sound legal advice. The act of decanting, in particular, can expose trustees to fiduciary liability and/or trigger undesirable income, gift, estate and generation-skipping transfer tax results.