Probate & Trust Law Section Conference Manual ... - Minnesota CLE

principal that is not limited to specific or ascertainable
purposes, such as health, education, maintenance, and
support, whether or not the term “absolute” is used. A
power to invade principal for purposes such as best
interests, welfare, comfort, or happiness shall constitute an
absolute power not limited to specific or ascertainable
purposes.
FLA. STAT. ANN. § 736.04117(b).
I. Need for Present Distribution. Some statutes explicitly state that the trustee
may decant even where there is no current need for a distribution. See, e.g.,
Alaska, Illinois, North Carolina and Ohio.
J. Restrictions on Trustees
1. States Prohibiting Interested Trustee from Decanting. Some statutes
prohibit certain interested trustees from decanting. If only interested
trustees are acting, decanting may be prohibited. For example, in Missouri
a trustee whose discretion is not limited by an ascertainable standard
cannot decant if the trustee is a beneficiary or has certain powers to
remove and replace the trustee. See also New Hampshire. In Nevada, a
trustee who is a beneficiary may not decant. See also New York, North
Carolina and Virginia. In North Carolina and Virginia, if all trustees are
beneficiaries, the court may appoint a special fiduciary with authority to
decant.
2. States Limiting Decanting by Interested Trustee. Other statutes
address the potential adverse tax consequences of an interested trustee
modifying a trust by limiting the types of modifications that can be made
by an interested trustee (see discussion below at Section V, C, 9). For
example, see the South Dakota statute, which restricts certain changes to
the beneficial interests of a beneficiary acting as trustee. Arguably, a
provision in the statute that the power is to be construed as a nongeneral
power of appointment is sufficient to impose limits on the powers of a
beneficiary acting as a trustee so as to avoid tax issues.
3. Absolute Discretion or Bifurcated Statutes. A statute that requires that
a trustee have absolute discretion to decant, or a bifurcated statute that
requires that a trustee have absolute discretion to make a beneficial
change, may not need to include a restriction on an interested trustee
decanting. Typically trusts will not give an interested trustee absolute
discretion over discretionary distributions because such discretion would
create gift and estate tax issues. In the unusual event that a trust does give
an interested trustee absolute discretion, the trustee will incur the tax
effects of holding a general power of appointment whether or not the
trustee also has a decanting power.
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