This answer is written by AI. The information provided in this response is intended for general informational purposes only and should not be considered as legal advice. Do not rely solely on the information provided in this response for any legal decisions. Consult with a qualified legal professional before making any decisions.

What are Irrevocable Trust Decanting Forms, Costs, and Tax Consequences?

Question from Answermerighnow, What are Irrevocable Trust Decanting Forms, Costs, and Tax Consequences?

Answer from AI:

Understanding Irrevocable Trust Decanting

Irrevocable trust decanting is a process that allows the trustee of an irrevocable trust to transfer the assets from the original trust into a new trust with different terms. This can be useful for various reasons, such as updating the trust to reflect changes in law, correcting drafting errors, or addressing changes in beneficiaries’ circumstances.

Key Elements of Trust Decanting

  • Trustee Authority: The trustee must have the authority to decant, which is typically granted by state law or the trust document itself.
  • New Trust Terms: The new trust can have different terms, but it must generally benefit the same beneficiaries as the original trust.
  • State Laws: Decanting laws vary by state, so it’s important to understand the specific regulations in your jurisdiction.

Costs Associated with Trust Decanting

The costs of decanting an irrevocable trust can vary widely depending on several factors:

  1. Legal Fees: Hiring an attorney to draft the new trust document and ensure compliance with state laws can be a significant expense.
  2. Administrative Costs: There may be costs associated with transferring assets, such as filing fees or appraisal costs.
  3. Trustee Fees: Trustees may charge for their time and effort in managing the decanting process.

It’s advisable to consult with a legal professional to get a detailed estimate of the costs involved in your specific situation.

Tax Consequences of Trust Decanting

Decanting an irrevocable trust can have various tax implications, including:

  • Income Tax: The new trust may have different income tax treatment, which could affect the beneficiaries’ tax liabilities.
  • Gift Tax: If the decanting changes the beneficial interests, it could be considered a taxable gift.
  • Estate Tax: Decanting may impact the inclusion of trust assets in the grantor’s estate for estate tax purposes.

The IRS has not provided comprehensive guidance on all aspects of trust decanting, so it’s crucial to work with a tax advisor to understand the potential tax consequences.

When to Seek Legal Advice

Given the complexity of trust decanting, it’s essential to consult with a legal professional to:

  • Ensure compliance with state laws and the terms of the original trust.
  • Understand the potential tax implications and how to mitigate them.
  • Draft the new trust document accurately to reflect the desired changes.

For more detailed information, you can refer to resources such as the [Internal Revenue Service (IRS)]( and state-specific trust laws.


Decanting an irrevocable trust can be a powerful tool for updating and managing trust assets, but it comes with legal and tax complexities. Always consult with a legal professional to navigate these challenges effectively.

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