Hitting the Reset Button- Changing the Once Unchangeable Trust

Do you ever wish you could hit the reset button?  Do a do-over?  This often is the case with irrevocable trusts in California.  The problem is that irrevocable trusts are just that, irrevocable.  Meaning you can’t change it under most circumstances.  Until now.

On September 14, 2018, California enacted the Uniform Trust Decanting Act.  Now, a trustee  of an irrevocable trust may distribute the property of a first trust to one or more second trusts or modify the terms of the first trust without the consent of the beneficiaries or approval of the court. What can you change?    The Act says that a trustee with limited distributive discretion may modify administrative provisions of the trust such as the successor trustee provisions or the powers of the trustee.  The trustee could also eliminate a beneficiary, change the standard for distributions, grant a power of appointment or extend the duration of the trust.

Sounds too good to be true?  Perhaps.  A 60 day notice period is required if the trustee wants to utilize the decanting statute.  The following persons must be notified:

 

(1) Each settlor of the first trust, if living or then in existence.

(2) Each qualified beneficiary of the first trust.

(3) Each holder of a presently exercisable power of appointment over any part or all of the first trust.

(4) Each person that currently has the right to remove or replace the authorized fiduciary.

(5) Each other fiduciary of the first trust.

(6) Each fiduciary of the second trust.

(7) The Attorney General, if there is a charitable beneficiary

 Of course, any of the above can object and if that happens, rest assured that the matter will end up in court and will need court approval even though the intent of the statute is to remove the requirement of court approval.

Having said that, not every change to a trust is something that beneficiaries would object to and having the ability to do a do-over without petitioning the court makes a lot of sense.