Decanting, appropriately referred to as a “do over,” is essentially distributing assets from an irrevocable trust to a new trust with different and presumably more desirable and flexible terms, leaving the unwanted terms in the original trust and not binding on the assets.

• Distribution of trust principal in further trust allows an irrevocable trust to evolve through decanting to meet a family’s changing needs without court involvement.
• The concept of decanting has become a very powerful tool for planners to modify irrevocable trusts and has emerged as one of the most progressive planning strategies available in dealing with irrevocable trusts and dynasty planning issues and can be applicable to both domestic and international trusts.
• Decanting also creates a streamlined option for easily transferring a trust from one state jurisdiction to another more favorable jurisdiction, such as South Dakota.

Many states do not have a decanting statute and not all decanting statutes are created equally. It is very important to evaluate the differences among the statutes when selecting proper situs for a trust. Bridgeford Trust Company produced this well-researched chart comparing the leading top-tier U.S. trust jurisdictions, with a particular emphasis on areas that clearly distinguish South Dakota as the superior trust jurisdiction in the overall analysis, including decanting. You can also view South Dakota Codified Law (SDCL) § 55-2-15 to 55-2-18 for more information.

We encourage you to watch the short video below for a more detailed discussion about decanting and how it modifies irrevocable trusts that were once considered unchangeable for domestic and international families.