YOU STOLE MY TRUST !: a recent Connecticut case considers Florida trust law and trust “decanting”–shifting trust assets to a new trust

Are you the beneficiary of a Florida trust? What can you learn about a very recent Connecticut Superior Court case involving trust litigation and the concept known as “trust decanting?”

Florida trust beneficiaries may not know a lot of trust terms or legal mumbo jumbo, but they learn it once they are exposed to trust administration by their trustee and by Florida trust lawyers. One concept involves the transfer of one trust’s assets to another trust: often called “decanting.”  In fact, unknowing trust beneficiaries might even wonder “who stole my trust?” if they learn that trust assets were “decanted” or transferred to another trust.  Decanting is not about stealing.  It’s about whether it makes sense to move or transfer or shift trust assets to another trust:  to be governed by the terms of the new trust (document.)

Florida trust law and Florida’s rules of civil procedure has special rules and procedures for transferring trust assets from one trust to another. One basic rule of Florida trust law is that you can’t just transfer assets “willy nilly.” There has to be a reason: a legal basis found in the facts and Florida trust law to do this. Also you can’t , generally, transfer assets from one Florida trust to another new Florida trust with different beneficiaries.

This recent Connecticut case dealt with many of the same issues which Florida probate and Florida trust lawyers deal with when there is a trust case: declaratory judgment actions which asks a trust court or a probate court to make a ruling or “declare” something, usually rights of trust beneficiaries or an interpretation of what the trust says. The trust court case also dealt with summary judgment: a procedure or motion which tries to prevent a trust trial by having the trust judge or the trust court, often a probate court, rule on the motion and the undisputed facts, if the facts are undisputed. The recent trust case also considered the legal concept of standing in trust lawsuits: who may bring a trust lawsuit or who may participate in a trust lawsuit? Who has the legal authority or ability to go into a probate court and be heard, argue about, a particular trust?

On the issue of decanting trust assets or moving trust assets from one trust to another, the Connecticut court said: “Decanting is the term generally used to describe the distribution of [irrevocable] trust property to another trust pursuant to the trustee’s discretionary authority to make distributions to, or for the benefit of, one or more beneficiaries [of the original trust]. Potentially, common-law provides authority for decanting, but a[S]tate statute or the terms of the trust instrument may expressly authorize a trustee to decant trust property to another trust. Trustees may decant to achieve a variety of favorable tax or nontax results or to address changes in [S]tate law or in other circumstances affecting management or administration of the trust after it has become irrevocable … In effect, a trustee with decanting power has the authority to amend an unamendable trust, in the sense that he or she may distribute the trust property to a second trust with terms that differ from those of the original trust … A trustee can only exercise a decanting power, however, in keeping with fiduciary obligations.”  In fact, the court considered what other states “do” about decanting trust assets.

Specifically, the Connecticut court discussed Florida trust law for trust decanting. Here is what the Connecticut court said about Florida trust law: “Florida’s decanting statutes provides in relevant part: “(1)(a) Unless the trust instrument expressly provides otherwise, a trustee who has absolute power under the terms of a trust to invade the principal of the trust, referred to in this section as the ‘first trust,’ to make distributions to or for the benefit of one or more persons may instead exercise the power by appointing all or part of the principal of the trust subject to the power in favor of a trustee of another trust, referred to in this section as the ‘second trust,’ for the current benefit of one or more of such persons under the same trust instrument or under a different trust instrument … (b) For purposes of this subsection, an absolute power to invade principal shall include a power to invade principal that is not limited to specific or ascertainable purposes, such as health, education, maintenance, and support, whether or not the term ‘absolute’ is used A power to invade principal for purposes such as best interests, welfare, comfort, or happiness shall constitute an absolute power not limited to specific or ascertainable purpose.” (Emphasis added.) Fla. Stat. § 736.04117. ”

Florida trust law continues to be the subject of what other courts in the United States are considering when they make decisions about trusts and Florida beneficiaries. For a complete copy of the opinion, or for more information about whether you can decant Florida trust assets, or what your rights are as a beneficiary of a Florida trust, please email michelle@pankauskilawfirm.com. Advocate hard. Litigate smart.