Nevada Court Prohibits Decanting of a Trust

Over the past several years, merging or decanting an existing trust has become a popular practice. But even with the growing acceptance of the method, where a trustee may remove or modify trust provisions from an irrevocable trust by pouring — or distributing — the trust assets from an old trust into a new trust, some individuals are trying to push the bounds of what is legally acceptable.

Near the end of March, a Nevada court ruled against a trustee who tried to decant half of a trust’s assets from the existing charitable trust into a new one.

The court made the decision In the Matter of the Fund for the Encouragement of Self Reliance, An Irrevocable Trust, 135 Nev. Adv. Op. No. __ (March 21, 2019),  to deny the trustee from decanting because only one of the two co-trustees wanted to decant one half of the trust into the new trust. The trust instrument required a unanimous vote of the trustees to make a distribution. 

Despite the fact that the new post-decanting trust would continue the purpose of the transferor trust but with just one trustee as the sole trustee, while the old trust would retain one-half of the assets and have the other co-trustee solely in charge, the court determined that the requirement in the governing instrument for both trustees to agree had to be met.


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