Americans who have set up irrevocable trusts in a location that has overwhelming income taxes may benefit from a process known as estate ‘decanting.’ This trust administration tool is used for irrevocable trusts, and it is gaining popularity among Floridians and other U.S. residents. Attorneys and estate planners explain that decanting involves simply distributing assets from an old trust to a new one, preferably with more favorable terms that better suit the needs of the estate owner. Although the process is not available everywhere – only about 20 states allow decanting – more people are taking advantage of these trust administration options.

There are three major reasons that a client might want to consider decanting his or her trust. First, state income taxes play a big role in most estate plans and trust matters; moving trusts to a state such as Florida may be beneficial, as our jurisdiction does not have a state income tax. Next, certain states allow longer periods on dynasty trusts. Florida permits trusts that are stretched out for up to 360 years, according to financial experts. Finally, state laws may simply be less friendly to the type of provisions a client wants to include in his or her trust. Moving to a more favorable state such as Florida could be a wise move for those grantors.

Decanting can be useful in a variety of scenarios. Imagine having a trust that stipulates periodic distributions for a beneficiary as he or she ages. In some cases, the trust owner might decide to create a dynastic trust designed to benefit multiple generations rather than simply stopping at immediate offspring. In that case, the trust’s assets could be decanted from another state into a Florida estate plan.

Trust owners who are looking to obtain more advantageous terms may benefit from decanting their estate into a Florida trust. A qualified estate planning attorney may be able to assist these clients, helping them understand the most advantageous decisions for their individual financial holdings.

Luis E. Barreto