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

precisely, to make certain exceptions to the grantor trust rules
inapplicable). Thus the possible risk is that the mere existence of a
decanting statute that permits the acceleration of a future interest to a
present interest causes trusts potentially subject to such statute to
unintentionally become grantor trusts.
2. Circumventing a Prohibition on Acceleration. Even in a state that
explicitly prohibits the acceleration of a future interest to a present
interest, it may be possible to effectively accelerate a future interest by
decanting to a trust in which the interests of the current beneficiaries last
for only a limited period of time such as six months.
3. Meaning of “Acceleration.” Even in states that prohibit the acceleration
of a remainder interest to a present interest, decanting might still result in
the remainder interest taking effect more quickly because the decanting
restricted or shortened the interests of the current beneficiaries. For
example, if a trust provided that the trustee could make discretionary
distributions among the grantor’s children, A, B and C, and then provided
that at the death of such children the remainder of the trust should be
distributed to grandchildren, and the trustee decanted to eliminate the
interests of children B and C, such a decanting might result in a remainder
interest taking effect more quickly because the remainder beneficiaries
then only have to survive A as opposed to the survivor of A, B and C.
G. Supplemental Needs Trusts. Two different concerns can arise around the
intersection of supplemental needs trusts and decanting. The first is the risk that
the existence of a decanting power could inadvertently affect the protection from
governmental claims of an existing supplemental needs trust. The second concern
is that under statutes that require absolute discretion in order to decant in a
manner that restricts a beneficiary’s interest, a trustee without absolute discretion
might not have the power to decant to a supplemental needs trust even though
such a decanting may be in a beneficiary’s best interest.
1. Existing Trust is a Supplemental Needs Trust. The Rhode Island
statute expressly protects existing supplemental needs trusts from any
argument that the decanting power permits the trustee to change the
provisions that make the trust a supplemental needs trust.
2. Conversion to Supplemental Needs Trust. Both Illinois and New York
have bifurcated statutes that would not permit decanting in a manner that
would alter a beneficial interest unless the trustee has absolute discretion.
However, both the Illinois and New York statutes create exceptions to
permit a trustee of a trust who does not have absolute discretion to decant
into a supplemental needs trust under some circumstances. Virginia
would permit a trustee of a trust who does not have absolute discretion to
decant into a supplemental needs trust with court approval. The Illinois
statute permits a trustee to decant a disabled beneficiary’s interest to a
supplemental needs trust if the trustee determines that to do so would be in
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