Pub. 8 2017 Issue 2

West Virginia Should Consider Decanting Statute By Roy Cunningham, Lewis Glasser Casey & Rollins PLLC A fter practicing for almost 20 years in New York exclu- sively in the areas of estate planning and estates and trusts, in January, I returned to West Virginia. After all that time, I am happy to continue serving my old trust clients in New York and my new ones in West Virginia. I am missing a few valuable tools of a trust practice for my West Virginia clients that I have for my ones in New York. For example, I was surprised to find that that West Virginia has yet to adopt a decanting statute. A decanting statute essentially permits a trustee to rewrite an irrevocable trust within certain parameters. New York, where trust law is well-developed, was the first state to adopt the statutory structure to permit decanting in 1992. Since then, half the states now have decanting statutes in some form or fashion. Given many of the challenges that face trustees and beneficiaries today, the ability of the trustee to change or modify the terms of a trust perhaps decades old and vaguely constructed, could be an invaluable tool in the hands of a proactive trustee. Under the New York statute, found at Estates, Powers, and Trusts Law Section 10-6.6, the trustee may decant the trust where it has the power to invade the principal of the trust. The trustee’s power to decant differs, however, depending on the degree of the trustee’s authority to invade the principal of the trust. For example, a trustee with unlimited discretion to invade trust principal may decant all or part of the principal of the trust, for and only for the benefit of one, more than one, or all of the current beneficiaries of the trust to the exclusion of one or more of such current beneficiaries. A trustee with power to invade trust principal, but without unlimited dis- cretion, may appoint part or all of the trust to a trustee of an appointed trust, provided that the current beneficiaries of the appointed trust will be the same as the current beneficiaries of the invaded trust and the remainder beneficiaries of the appointed trust shall be the same as the beneficiaries of the invaded trust. In New York, a trustee using the power has a fiduciary duty to act in good faith and in the interest of the beneficiaries. As a discretionary power, the decanting power may be exercised without consent or approval of the beneficiaries or a court. The exercise of the power to decant must be by a written instrument that is signed, dated, and acknowledged by the trustee exercising the power. The trustee exercising the power must give notice of the decanting by providing a copy of (1) the decanting instrument; (2) the invaded trust; (3) the appointed trust to (a) all persons interested in the invaded trust; (b) all persons interested in the appointed trust; (c) the settlor, if living; and (4) any person having a right in the invaded trust to remove or replace the trustee exercising the power. The decanting is effective 30 days after notice to all of the interested parties or sooner if the interested parties consent to an earlier date. Decanting can be a very powerful tool for a trustee facing difficult challenges. For example, I recently assisted a corpo- rate fiduciary in decanting a trust that delayed payments to a beneficiary with a substance abuse problem. The trust was established in the late 1960s and provided that the income and principal could be paid out to a class of persons, con- sisting of the decedent’s daughter and grandchildren, at the trustee’s absolute discretion. Upon each grandchild attaining the age of 30, he or she was to receive a lump sum payment from the trust based upon the assets in the trust at that time. About six month before the granddaughter attaining the age of 30, the trustee was contacted by her mother and informed of the granddaughter’s substance abuse problem and that if she received the lump sum distribution, she would probably overdose and die. The trustee requested and I prepared the documents to decant the trust into a new trust that removed the payment upon attaining the age of thirty. All parties were served and the 30-day period ran. By removing the payment, the trustee was able to eliminate a payment to a beneficiary who would have most likely used the payment to harm her- self. Some trust and estate practitioners believe that the ability of a trustee to decant and essentially rewrite a trust violates the intent of the grantor. I believe, however, that the ability to de- cant a trust provides the trustee with one more tool to insure the intent of the grantor. In the example above, I am certain that the grantor would not have wanted to make a distribu- tion to a granddaughter who would use it to harm herself. Given the benefit of a decanting statute, I certainly think that West Virginia should consider adopting one.  Roy Cunningham is an attorney for Lewis Glasser Cassey & Rollins PLLCwho concentrates his practice in the areas of estate planning, estate and trust litigation and taxation. He has a wealth of experience in complex estate planning, including the preparation and execution or wills, living trusts, grantor retained annuity trusts, intentionally defective grantor trusts, beneficiary defective grantor trusts, and family limited partnerships as well as basic estate planning documents. He can be reached at 800.695.6958 or cunningham@lgcr.com. www.wvbankers.org 16 West Virginia Banker