Background: Trusts provide a means of transferring real or personal property. A trust is created by a trustor, who gives their property to a trustee. The trustee holds the legal title to the property and has fiduciary duties to manage the property for the benefit of other individuals specified by the trustor. The beneficiaries hold the equitable title to the property, meaning the beneficiaries enjoy the property, but do not have control over the trustee or how the trustee manages the legal title. Trusts can be made revocable or irrevocable by the trustor. Revocable living trusts are commonly used as an alternative to traditional wills as a way to pass property upon death.

Washington statutes and case law governing trust and estate law address a range of issues relating to trusts, including the requisites for creating and amending trusts, the duties and powers of trustees, trust administration, distribution of assets, liability issues, and the investment of trust funds.

The Uniform Law Commission adopted the Uniform Trust Decanting (Uniform) Act in July 2015. Trust decanting is a non-judicial method for modifying an irrevocable trust. The decanting power is the power to modify a first trust, either by changing the terms of the first trust or by distributing property from the first trust to a second trust. The decanting power allows a trustee to modify an irrevocable trust document within reasonable limits to ensure the trust will achieve the original intent. The Uniform Act prevents decanting when it would defeat a charitable or tax-related purpose of the settlor. Several states have enacted legislation on the subject.

Summary: Decanting power means the trustee can distribute income and principal of a first trust to a second trust, or trusts, and modify the terms of the first trust.

The extent of the decanting authority depends upon the extent of discretion granted to the trustee to distribute principal. A trustee with limited discretion is constrained by an ascertainable or reasonably definite standard. The interests of each beneficiary in the second trust must be substantially similar to such beneficiary’s interests in the first trust. Generally, a trustee with limited discretion can modify administrative, but not dispositive, trust provisions. A trustee with expanded discretion may exercise the decanting power to modify some beneficial interests but must protect certain current interests. The trustee may not include a new beneficiary, who is not a beneficiary of the first trust, and may not reduce vested interests.

Decanting powers may be exercised if it is consistent with the trustee's fiduciary duties. The trustee must give written notice to each qualified beneficiary of intent to decant the first trust at least sixty days prior to decanting. A qualified beneficiary of the trust, or another person with a defined interest in the trust, may petition the court over the exercise of decanting power.

All rights, privileges, immunities, powers, and purposes of the first trust remain vested in the second trust. Debts, liabilities, and legal actions enforceable against the first trust continue to the same extent against the second trust. Decanting powers are limited if the first trust instrument expressly limits decanting powers. The restriction must be included in the second trust. Decanting powers may not increase the compensation of the trustee beyond a specified compensation, or above compensation permitted by law, unless all beneficiaries consent or if it is approved by a court.

Charitable trust is defined. A trustee is required to give written notice to the state Attorney General prior exercising decanting powers where a trust includes a charitable provision.

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