Friday, June 29, 2012
In the past year, the State of Virigina adopted a law that allows for the trusts with a decanting provision. Decanting powers gives the trustee the authority to transfer all principal and income interest from one trust to a different but a similar trust. The trust where the interested is transferred to becomes the new trust. Virginia is one of only 15 states that allow this type of trust provision. This type of provision is generally used to get around the problem of not being able to change an irrevocable trust. The trustee is allowed to create a new trust that is in the "spirit" of the old trust. This gives the trustee more flexibility and allows him or her to modernize the trust without changing the original purpose of the old trust.
In addition, Virginia passed another law to protect the interests of trustee. Now, the state has a law that states that if a trustee follows the direction of a trust protector, then that would shield the trustee from liability. In other words, the trustee cannot be held liable for any bad act he or she commits if that person committed them at the direction of the trust protector.
See Scott Zucker, 2012 Changes in VIrginia Trust Law (Part 2): Decanting & Directed Trusts, The Zucker Law Firm PLLC, June 22, 2012.