Trust Decanting: Now Authorized in Massachusetts

iStock_000001258744SmallEarlier this year the Supreme Judicial Court ruled in Morse v. Kraft, 466 Mass. 92 (2013), that under certain circumstances a Trustee has the ability to decant as part of the Trustee’s power to make discretionary distributions to the trust beneficiaries.  The term decanting is derived from a concept generally associated with wine; pouring from one container to another in order to leave any non-desired sentiment behind.

When broadened to trusts, decanting is a method for a Trustee to transfer the assets from an old irrevocable trust into a new one, presumably with terms that address whatever issue has arisen that makes the old trust no longer desirable.

While this concept has been used in other states for several years and is becoming an increasingly popular way to deal with problematic trusts, this is the first time a Massachusetts court has ruled that it is allowable without court approval or notice to beneficiaries under Massachusetts law.  Even so, the court did not declare an outright ability for a Trustee to decant that is inherent in a Trustee’s authority.  Rather, the terms of the trust instrument must authorize the Trustee to make discretionary distributions for the benefit of the beneficiary, thereby showing that the Grantor intended this possibility.

The Court also referenced a Trustee’s fiduciary duty to the beneficiaries, implying that these duties cannot be violated when the distribution is made.

Many states have statutes authorizing the Trustee’s ability to decant.  Perhaps the Massachusetts legislature will choose to take this path.  Until then, under the court’s guidance in Kraft, Massachusetts attorneys now have another weapon in our arsenal to change the seemingly irrevocable. Duck

About Tracy Craig

Tracy is a partner and chair of the firm's Trusts and Estates Group. She focuses her practice in estate planning, estate administration, prenuptial agreements, tax-exempt organizations, guardianships and conservatorships and elder law. Before joining Mirick O'Connell, she was counsel at Testa, Hurwitz & Thibeault LLP, in Boston.
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