Spouses often create estate plans based on their desire to support one another and optimize their use of a pool of shared resources. When their marriage ends, each spouse may need to make adjustments to their existing estate planning paperwork. They usually remove one another as beneficiaries and from positions of authority.
Sometimes, spouses may have created irrevocable trusts as a means of reducing tax liability, protecting resources from creditor claims and leaving the most meaningful legacy possible. In scenarios where spouses funded an irrevocable trust, decanting that trust may be necessary to ensure their financial and legal protection post-divorce.
What decanting a trust entails
Decanting an irrevocable trust is a legal process through which people adjust a trust that is otherwise not subject to modification. Frequently, the decanting process involves transferring assets from an outdated trust into a new trust with more favorable legal language.
The process required to decant a trust depends in part on the authority of the trustee and the language of the trust itself. A court order requiring the division of trust resources or the creation of two separate trusts could play a role in decanting a trust funded during a marriage. Spouses may need to each select a trustee and establish new terms for the trusts they retain after decanting the shared trust.
Spouses facing complex estate planning challenges after a divorce may benefit from discussing their evolving legal needs with a professional, generally. Also, reviewing trust paperwork and the property division decree with an estate planning attorney can help people identify the steps necessary to decant an irrevocable trust. Decanting a trust may be necessary to effectively divide property or separate legal authority after a divorce.