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

eliminate beneficiaries or change the distribution standard, and the new trust
(except in North Carolina and Virginia) must contain the same power of
appointment as in the old trust. This may be explicit in the statute (see, e.g.,
Illinois and New York), or implicit in the requirement that the decanting not
materially change the beneficial interests (see Michigan § 700.7820a).
E. Are Beneficiaries of New Trust Limited to Current Beneficiaries of Old
Trust?
1. Limited to Current Beneficiaries. The narrowest theory of decanting
permits decanting only to a trust for the benefit of the current beneficiaries
(those who could receive a discretionary distribution) of the old trust.
This appears to be the case under New Hampshire’s statute. Under such a
statute, the remainder beneficiaries who are not also current beneficiaries
must be deprived of their interest if the trust is decanted. This limitation
may also apply under the Kentucky, Tennessee and Rhode Island statutes,
and the Ohio statute where the trustee does not have absolute discretion.
This restriction may be mitigated in states that have a “boomerang
provision.” A “boomerang provision” permits the new trust to provide
that at some future time the beneficial provisions of the new trust revert to
the beneficial provisions of the old trust, including the provisions
regarding remainder beneficiaries. States that permit changes to beneficial
provisions for current beneficiaries, but then also permit a boomerang
provision so that the remainder beneficiaries of the old trust do not need to
lose their interests, include Delaware, Nevada, Michigan § 556.115a and
Ohio (when the trustee has absolute discretion).
2. Not Limited to Current Beneficiaries. In other states, remainder
beneficiaries of the old trust may be, or under some statutes must be,
beneficiaries of the new trust.
a. Remainder Beneficiaries of Old Trust May Be Beneficiaries.
The decanting statutes of some states appear to permit but not
require that remainder beneficiaries of the old trust be remainder
beneficiaries of the new trust. Generally, in these states the new
trust could eliminate one or more of the remainder beneficiaries.
For example, the Illinois statute permits a trustee with absolute
discretion to decant to a trust “for the benefit of one, more than
one, or all of the current beneficiaries of the first trust and for the
benefit of one, more than one, or all of the successor and remainder
beneficiaries of the first trust.” The Missouri statute permits the
beneficiaries of the new trust to include current beneficiaries of the
old trust and beneficiaries of the old trust “for whom a distribution
. . . may have been made in the future . . . or upon the happening of
an event.” See also South Dakota. Other state statutes are less
explicit, but presumably allow the remainder beneficiaries of the
old trust to be beneficiaries of the new trust. See, e.g., Arizona,
Florida, Indiana and Virginia.
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