Parents in Florida looking to provide financial peace of mind for their children sometimes set up an irrevocable trust with the assumption that the funds will be used responsibly by the time they are accessible. Unfortunately, this is not always the case. It’s not unusual for a trust holder to become frustrated with an adult child with no real ambition to seek meaningful employment due to the anticipation of a trust fund “kicking in” when they reach a certain age.
At one time, it was conventional wisdom for estate planners to suggest irrevocable trusts. Even though economic and societal circumstances have changed, irrevocable trusts can be difficult or nearly impossible to alter. But this is now changing since many states have added “decanting” statutes that allow trust holders to fix a broken irrevocable trust. What’s sometimes referred to as a “do-over trust” allows a trust holder to transfer assets from an existing irrevocable trust to one with more suitable provisions.
This is a fairly new legal concept, although there are many reasons why trust holders may wish to consider it. For instance, an old trust that ends with a creator’s children may be converted to a dynasty trust that provides for mutliple generations if assets have significantly increased since the original trust was set up. Decanting may also be used to combine trusts, set up a special needs provision for a disabled child, or change distribution arrangements for added protection against creditor claims, pending liabilities, and similar issues.
Decanting statutes now allow trust creators to fix poorly drafted or antiquated irrevocable trusts. However, specific stipulations for doing so can vary from state to state. For this reason, an estate planning attorney may recommend moving the trust to another state that allows for more flexibility, especially if a trust has a common change of situs provision.