Wednesday, October 16, 2019
Lydia Lee Lockett and Peter Blumeyer recently published an Article entitled, Sour Grapes: When Decanting Gives Rise to Litigation, Probate & Property, Vol. 33, No. 5 (Sep/Oct 2019). Provided below is the introduction to the Article.
By the end of 2018, there were 29 states that had enacted trust decanting statutes, with approximately 22 of those taking effect in the last decade. With the prevalence of decanting increasing, courts are increasingly being force to consider the circumstances under which decanting is permissible and, relatedly, what remedies are available in case of impermissible decanting. It behooves fiduciaries, beneficiaries, and trusts and estate practitioners to familiarize themselves with this emerging area of law, so they recognize and avoid common pitfalls associated with decanting and recognize the attendant issues associated with decanting before those issues evolve into litigation. This article provides a selective overview of decanting and common themes and issues that have arisen in decanting litigation in the United States, including the authority to decant, the intersection of decanting and family law and special needs trusts, creditor avoidance, and remedies for unauthorized decanting.
It is worth noting that the commonly litigated issues discussed in this article are not exclusive. Given the nearly unlimited ways in which a trust may be modified through decanting, it is foreseeable that a plethora of issues relating to decanting may be litigated, such as tax controversies resulting from decanting, disputes relating to decanted trust that change the governing law of the trust, or challenges to a decanting that grants powers of appointment to beneficiaries. Because these types of controversies could rise in the future, trustee, financial advisors, and trusts and estates practitioners should consider these and other potential issues could result from decanting.