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Now that January is here, the annual shift from holiday excess to organization has occurred. One area that is often overlooked in organization is estate planning.  In addition to the typical review of who serves as guardian, executor, and trustee, it may be time to review old irrevocable trusts and determine whether they still function as intended.  If an old trust no longer has provisions that fit the family, it may make sense to determine whether it should be changed.

In December 2012, the Michigan legislature passed its decanting statute. Decanting is a technique, in which the trustee of an irrevocable trust moves the assets from the “old” trust into a new trust.  When a trust is decanted, the assets are “poured” into the new trust vessel where they are able to open up and be better used.

Some examples of trusts that may benefit from decanting are:

* Old irrevocable life insurance trusts, which were created when beneficiaries were young.  This sort of trust could benefit from decanting, creating longer or shorter distribution ages, depending on the beneficiaries; updating the trust for changes in the law; or creating a more restrictive agreement.

* If there are several trusts for the benefit of one beneficiary, it may make sense, to consolidate all of the trusts into a new trust with current language. 

* In the alternative, it may make sense to divide one trust held for many beneficiaries into different trusts for each beneficiary, allowing each beneficiary assets to be held and managed solely for their unique circumstances.

* A trust may benefit from decanting if it was created in another state and the trustee and beneficiaries now reside in Michigan.

* Trusts can be decanted into a new trust to convert non-grantor trusts back into grantor trusts for income purposes.  Trusts may also be decanted to convert from grantor to non-grantor status. 

* Trusts may be decanted to provide for advisors, to help make financial decisions, or to create special trust protectors to ensure that the beneficiaries receiving the assets are the ones who should receive the assets. 

* Finally, decanting can be helpful to protect the trustee and allow for changes in diversification or retaining an asset to protect the trustee from breaching a fiduciary duty. 

Now that the new year is upon us, a review of those old trusts is not a bad idea to determine whether it makes sense to update the trust and ensure that all of the family’s goals are met.