Trust law is designed to preserve wealth across generations, but circumstances rarely remain static. Families change, tax rules evolve, and legal frameworks develop in ways that can make an existing trust less effective than it once was. In the past, trustees often had to rely on court intervention or narrowly drafted amendment powers to address these issues, both of which could be costly and restrictive. Over time, practitioners developed another solution known as trust decanting.
Decanting gives trustees the ability to transfer assets from one trust into another with updated terms. This makes it possible to modernize a structure while still respecting the settlor’s original intent. First recognized in common law practice and now embedded in legislation in several jurisdictions, decanting has become a practical tool for long-term planning where flexibility and legal certainty are highly valued.
What Is Trust Decanting?
Trust decanting is a legal mechanism that allows trustees to transfer assets from one trust into another with different or updated terms. It is most often applied to irrevocable trusts, which by definition cannot simply be amended. Through decanting, a trustee with sufficient discretionary powers can restructure the trust’s provisions in order to keep it effective, relevant, and aligned with both legal requirements and the family’s long-term objectives.
The term “decanting” comes from the image of pouring wine from one bottle into another, leaving sediment behind. In trust law, assets are “poured” from the original trust into a receiving trust, with outdated or restrictive provisions left behind while improved or modern provisions carry forward.
In practice, decanting provides trustees with a flexible way to refine a trust without resorting to court proceedings. It may involve clarifying administrative powers, expanding investment authority, or adjusting distribution terms to meet the changing circumstances of beneficiaries. By combining administrative efficiency with substantive adaptability, decanting helps preserve the settlor’s intent while giving trustees the tools to manage a trust in step with present-day realities.
Historical Background
The roots of decanting can be traced to the United States in the late twentieth century as practical response to the rigidity of irrevocable trusts. Courts in New York were among the first to recognize that trustees with discretionary powers could, in effect, move assets into a new trust with updated terms. Early cases such as Matter of Spencer (1985) and Matter of Estate of Morse (1992) signaled judicial acceptance of the idea that distribution powers could extend to creating a new trust, provided it served the interests of the beneficiaries.
Following these decisions, legislatures stepped in to provide statutory clarity. New York enacted one of the first decanting statutes in 1992, setting out when and how trustees could exercise the power. Delaware and other states quickly followed, each refining the scope of what could be changed through decanting. Some jurisdictions limited the practice to administrative provisions, while others allowed more substantive changes, such as adjusting beneficiary rights.
By the early 2000s, decanting statutes had spread across much of the United States, reflecting a broader trend in trust law toward flexibility. The Uniform Law Commission also began drafting model provisions, which helped standardize the concept and encouraged wider adoption. From there, the principle influenced other common law jurisdictions, where courts and legislatures began considering whether trustees should have similar powers.
Today, decanting has become a recognized doctrine in many parts of the world. Its historical development shows a clear shift in trust law, moving from strict adherence to original terms toward a more adaptive approach that allows trusts to function effectively across generations.
Structural Mechanics
Decanting is built on the relationship between two trusts. The first is the source trust, which is the existing structure that holds assets. The second is the receiving trust, which is the trust that will take over administration of those assets. The trustee exercises discretionary distribution powers to move the property from one to the other.
The receiving trust can take two different forms:
- Existing trust: assets may be transferred into another trust that is already in place. This is often done when there is a family trust that already contains appropriate provisions or where it is more efficient to consolidate administration into a single vehicle. Using an existing trust avoids the cost of drafting a new deed, but it is only possible when that trust’s terms are compatible with the powers in the source trust.
- Newly created trust: if no suitable trust exists, the trustee may establish a new one and then transfer assets into it. This option is often chosen when the goal is to modernize provisions, introduce new distribution powers, or create a structure tailored to a particular need, such as planning for a beneficiary with special requirements. Drafting a new deed provides greater flexibility but also requires careful attention to legal and tax implications.
In both cases, the original trust continues to exist after decanting. It does not disappear automatically, although in practice it may be left with little or no property. For the transfer to be effective, trustees must ensure that all titles, account registrations, and records are updated to reflect the receiving trust. This ensures that the new trust, whether existing or newly created, becomes the operative structure for administration and distributions going forward.
A well-known example of this approach is Matter of Kroll in New York. In that case, the trustee decanted assets from one trust into a new trust designed to meet the needs of a disabled beneficiary. The court upheld the action, recognizing that decanting was a valid way to restructure the trust so the beneficiary could qualify for government assistance while still benefiting from the trust.
Decanting vs Other Trust Modification Tools
Decanting is one of several ways to change or adapt a trust, but it operates differently from other methods.
- Amendment allows a deed to be changed directly if the trust reserves that power, but this is rare for irrevocable trusts.
- Protector powers give a protector authority to make specific changes, such as replacing a trustee or approving distributions, yet these powers are usually narrow and tied to what the deed expressly provides.
- Court modification can authorize broader changes, but this process is expensive, time consuming, and public, which often undermines the privacy that trusts are meant to provide.
- Non-judicial settlement agreements are recognized in some jurisdictions, permitting trustees and beneficiaries to agree on certain changes, although these agreements depend heavily on local law and may not always be binding.
Decanting differs because it does not rely on a reserved amendment clause, protector consent, or judicial approval. It makes use of trustee discretion to transfer assets into another trust with more suitable terms. This keeps the process private, efficient, and responsive, while still requiring trustees to act within fiduciary and statutory boundaries.
Common Reasons for Trust Decanting
Trustees look to decant for a combination of legal, administrative, and family-centered reasons. These objectives usually arise when an existing trust no longer functions smoothly or when circumstances have changed in ways that the original deed did not anticipate. Decanting provides a tool to bring a trust back into alignment with both current law and the needs of its beneficiaries.
| Category | Objectives | Example |
| Legal | Correct drafting errors such as mistakes in wording or structure; update trust terms to reflect changes in trust law or case law | A deed mistakenly limited trustee powers to income-only investments; decanting into a corrected trust allows total return investment |
| Tax and Regulatory | Adapt to new tax legislation, restructure to comply with reporting obligations (FATCA, CRS, AML), reduce exposure to double taxation or adverse reporting | A trust settled before FATCA is decanted into a new trust with proper reporting clauses to avoid penalties and ensure bank acceptance |
| Jurisdictional | Move a trust into a jurisdiction with stronger legal protections, or take advantage of statutes that offer better creditor resistance and privacy | A family relocates and transfers assets into a trust governed by a jurisdiction that does not recognize foreign forced heirship claims |
| Administrative | Simplify trust management by consolidating multiple trusts, create separate trusts for different family branches, modernize trustee succession, or add flexible administrative powers | Two family trusts created in the 1980s are combined into a single new trust to reduce duplicate trustee fees and simplify annual accounts |
| Investment Flexibility | Expand or update permitted investment powers so trustees can access asset classes not contemplated when the original trust was drafted | A trust limited to government bonds is decanted into a new trust that allows diversified investments including private equity and venture funds |
| Beneficiary and Family Needs | Adjust distribution terms to reflect current needs, create new classes of beneficiaries, provide for a disabled child, or add flexibility for divorce or remarriage | A trustee creates a new special needs trust through decanting to preserve government benefits for a disabled beneficiary |
| Succession and Generational Planning | Extend the duration of a trust where perpetuity rules have changed, include terms for unborn heirs, or restructure to ensure wealth passes smoothly across generations | A trust approaching its perpetuity limit is decanted into a new dynasty trust to preserve assets for future generations |
| Dispute Management | Reduce conflict by dividing a trust into separate vehicles, or restructure decision-making powers to avoid deadlock between trustees or beneficiaries | A trust is split into two separate trusts, one for each sibling, to prevent ongoing disputes about investment and distribution priorities |
When Should a Trust Be Decanted?
Trustees must weigh circumstances carefully before proceeding. Decanting is a powerful tool, but it is not appropriate in every situation. The decision depends not only on the objectives that make decanting desirable but also on the limits of trustee authority and the potential consequences for beneficiaries.
Appropriate Circumstances
Decanting may be suitable when:
- The trust deed has become outdated and no longer serves its purpose.
- Beneficiaries’ needs have changed in ways the original deed did not anticipate.
- Legal or tax changes require structural adjustments that cannot be made through simpler tools.
- Administrative improvements are possible without disturbing vested rights.
- The trust is approaching its perpetuity limit and continuation in a new trust is needed.
Unsuitable Circumstances
Decanting may be unsuitable when:
- The trustee lacks clear discretionary powers of distribution.
- Restrictions in the deed or governing statute prohibit the intended changes.
- Vested beneficiary rights would be unfairly removed or diminished.
- Litigation risks or potential disputes outweigh the expected benefits.
- Another mechanism, such as protector powers or court variation, is more appropriate and less contentious.
Key Questions for Trustees
Before decanting, trustees should ask:
- Do I clearly have the authority to act?
- Will the change respect vested rights and the settlor’s intent?
- Is decanting the least disruptive option available?
- Would this decision withstand scrutiny if challenged by beneficiaries or in court?
Process of Trust Decanting
Decanting usually follows a structured sequence, even though the details vary between jurisdictions and depend on the terms of the trust. Trustees should approach the process step by step, ensuring that each stage is well documented and legally supportable.
1. Confirm Authority
The starting point is a review of the trust deed to confirm that the trustee holds discretionary distribution powers broad enough to support decanting. Statutory or case law in the governing jurisdiction must also permit the exercise. Trustees often obtain legal advice or a written opinion at this stage to demonstrate that they acted prudently. Authority may also depend on whether the proposed changes affect only administrative matters or extend to beneficial interests.
2. Create a Receiving Trust
A receiving trust is required to accept the assets. If an existing trust already reflects the intended provisions, it may serve this role. Otherwise, a new trust can be drafted with updated terms. This is also the stage where jurisdictional planning comes into play. In some cases, a receiving trust is established under the law of another jurisdiction, either to access more favorable statutes or to strengthen asset protection. The key consideration is ensuring that the receiving trust is valid and capable of holding all types of assets being transferred.
3. Transfer Assets
Once the receiving trust is ready, the assets are formally transferred. This may involve retitling accounts, re-registering securities, or executing deeds for real property. For illiquid assets, valuations may be required to ensure accurate recording. Trustees must also consider whether consents are needed from third parties, such as banks or investment managers, and ensure continuity of insurance, contracts, or partnerships tied to the assets.
4. Record the Decanting
The final step is thorough documentation. Trustees typically pass formal resolutions, notify beneficiaries where required, and update records with financial institutions and registries. Supporting documents such as legal opinions or tax memoranda may also be retained. Careful documentation shows that the trustee acted within their powers and met fiduciary obligations, while also providing a clear record in case the process is later reviewed.
Key Considerations in Decanting
Decanting should never be approached as a routine administrative step but as a significant restructuring that requires careful legal, tax, and fiduciary analysis. A trustee who weighs various factors and documents the process thoroughly is far more likely to achieve a result that stands up to scrutiny and protects the long-term interests of the trust.
Fiduciary Duties
The cornerstone of any trustee decision is the duty of loyalty and care. Decanting must be undertaken for the benefit of all beneficiaries, not for the convenience of the trustee or third parties. Trustees should be prepared to show that the decision was prudent, that alternatives were considered, and that the outcome aligns with the settlor’s intent. Failure to document this reasoning can leave trustees vulnerable to claims of breach of duty.
Conflicts of Interest
Decanting often reshapes the balance of rights and expectations among beneficiaries. Trustees must avoid even the appearance of acting to favor one group at the expense of another. For example, extending trust duration might advantage younger generations but frustrate the interests of older beneficiaries who expected earlier distributions. Careful balancing, transparent communication, and in some cases independent advice are key to managing this risk.
Consent and Notice Requirements
Trust deeds and statutes may impose conditions on the exercise of decanting powers. Some require consent from a protector, while others involve co-trustees in the decision. Even where not mandatory, providing notice to beneficiaries can reduce disputes and demonstrate good faith. The timing and scope of notice should be calibrated to the sensitivity of the changes being made.
Tax Implications
Transferring assets into a new trust may have unintended tax consequences. In some jurisdictions, the act of decanting is treated as a distribution or resettlement, triggering tax on gains or transfer charges. Cross-border implications are even more complex, especially when reporting regimes such as FATCA or CRS apply. Trustees should seek tax analysis early in the process and retain written opinions to support their decisions.
Restrictions on Decanting
No matter how broad the statutory framework, limits always apply. Trustees cannot override vested beneficiary rights, mandatory distribution clauses, or statutory restrictions. Attempting to do so risks invalidating the decanting and exposing the trustee to liability. A detailed review of both the trust deed and the governing law is therefore an essential first step before drafting a receiving trust.
Cross-Jurisdictional Decanting
Trusts are often settled in one jurisdiction but later require restructuring in another. Decanting can provide a way to transfer assets from an existing trust into a new trust in a different jurisdiction, provided the original deed and governing law allow it. Court approval may be required in some places, and recognition of the transfer abroad depends on local rules.
Comparison of Jurisdictions
Trust jurisdictions take very different approaches in how they authorize and regulate decanting. These differences affect cost, timing, and the degree of certainty trustees and families can expect.
| Jurisdiction | Basis of Authority | Key Features |
| United States (Delaware, Nevada, etc.) | State statutes | Widely available but varies by state; often requires beneficiary notice and limits changes to beneficial interests |
| Cayman Islands | Case law and statutory provisions | May require court involvement; procedures can be formal and add cost |
| Bermuda | Statutory provisions with court involvement | Court oversight is common; processes are established but less flexible |
| British Virgin Islands | Judicial interpretation | Decanting not expressly codified; authority depends on court interpretation |
| Cook Islands | Statutory provisions | Focused mainly on asset protection; narrower scope for administrative changes |
| Nevis | NIETO statutory provisions | Trustees with discretionary powers may transfer assets to another trust without court or registry filings |
Decanting in Nevis
Nevis has positioned itself as one of the few jurisdictions that provides clear statutory authority for trust decanting. While many common law systems rely on case law or implied trustee powers, Nevis chose to codify the practice directly into its legislation. This gives trustees greater certainty when exercising their powers and allows families to plan with confidence that the validity of decanting does not depend on judicial interpretation.
Statutory Authority Under NIETO
The Nevis International Exempt Trust Ordinance (NIETO, CAP 7.03N) establishes the statutory foundation for decanting by confirming the scope of trustee distribution powers. Section 8A provides:
“In the case of a discretionary interest in an international trust, a trustee who has the authority to pay income or principal to a beneficiary may pay it to a third party if the payment is for the benefit of the beneficiary… and the trustee of an international trust shall not be liable to any creditor of a beneficiary for paying income or principal on behalf of such beneficiary.”
This provision confirms that trustees with discretionary distribution powers may transfer or appoint trust property to another trust, whether for the same or different beneficiaries. By embedding these powers directly in statute, NIETO offers a level of clarity that is not always present in jurisdictions where decanting rests on case law or implied authority.
For trustees, this framework reduces litigation risk and avoids the need for creative interpretations of distribution clauses. For settlors and beneficiaries, it provides predictability, since the validity of decanting rests on express legislative authority rather than judicial discretion.
Scope of Trustee Powers
Under NIETO, trustees may exercise broad powers when decanting, provided they act within the limits of their discretionary authority and fiduciary duties. These powers can be used to:
- Update or modernize administrative provisions,
- Expand or refine investment authority,
- Alter the timing or manner of distributions,
- Adjust terms to reflect changes in family or tax circumstances.
The statute allows trustees to transfer assets into a receiving trust with terms that differ from the original trust. This flexibility gives trustees a practical tool to address outdated provisions while keeping the trust structure aligned with the settlor’s intent.
The scope of authority is not unlimited. Trustees cannot override vested rights, remove mandatory distribution clauses, or disregard express restrictions in the trust deed. Their authority must always be exercised consistently with fiduciary duties and with the settlor’s original purpose in mind.
Procedural Requirements
In Nevis, the procedure for decanting is defined more by what is not required than by what is. NIETO does not call for court approval, nor does it require filings with the public registry. This absence of external formalities gives trustees the ability to act with speed and discretion.
What remains essential is robust internal governance. Trustees are expected to pass resolutions that set out their authority and the reasons for decanting. Where a new trust is created, it must be properly settled under Nevis law. If an existing trust is used, its terms should be reviewed for compliance with statutory requirements and the settlor’s intent.
Professional advice often supplements these steps. Although not mandated by NIETO, trustees frequently obtain legal or tax opinions to confirm that the decanting is valid and that cross-border implications have been considered. Keeping a complete internal file of these materials is standard practice and provides a defensible record if the exercise is ever questioned.
Advantages of Decanting in Nevis
Nevis provides a statutory framework that makes decanting both practical and reliable. By removing procedural hurdles and confirming trustee authority in law, NIETO offers advantages that distinguish it from jurisdictions where the process is less certain. These advantages can be grouped into three main areas:
Legal Certainty
- Predictability: trustees act under clear statutory authority rather than relying on judicial interpretation.
- Confidentiality: no registry filings are needed, so the details of the decanting remain private.
Practical Operation
- Efficiency: NIETO does not require court approval, which reduces delays and lowers costs.
- Cost control: by avoiding litigation or formal variation proceedings, decanting helps reduce professional and administrative expenses.
- Continuity: assets can move into a receiving trust without interrupting management or creating gaps in administration.
- Flexibility: a receiving trust can update administrative or distribution terms without dissolving the original structure.
- Adaptability: decanting can be used to shift the trust into another jurisdiction when circumstances or family needs change.
Protection and Planning
- Asset protection: trustees can update or restructure without exposing the trust to litigation or weakening firewall provisions.
- Tax neutrality: the Nevis framework does not impose additional local tax consequences on the decanting process.
- Beneficiary protection: trustees can modernize provisions to reflect current needs, such as creating special needs trusts or updating distribution standards.
Work with Trust Nevis
Trust decanting is a powerful mechanism for keeping trusts effective over time. Nevis provides one of the clearest statutory frameworks for this process, allowing trustees to transfer assets into a receiving trust under explicit legislative authority. This clarity reduces reliance on case law or court approval and gives families greater confidence in long-term planning.
The jurisdiction’s strength extends beyond decanting. Nevis has built one of the most protective trust regimes in the world, designed to withstand external challenges. Key features include:
- Non-recognition and enforcement of foreign judgments
- Short limitation periods for creditor claims
- High burden of proof required in Nevis courts
- Narrow scope for fraudulent transfer claims
- Express exclusion of foreign forced heirship rules
At Trust Nevis, we advise on the full lifecycle of Nevis trusts, from initial settlement through later restructuring. For trustees and families considering decanting, or looking to strengthen asset protection, we provide guidance on how to apply Nevis law effectively. Our role is to help clients use the jurisdiction’s framework with confidence, ensuring that trusts remain resilient and adaptable over time.
Frequently Asked Questions
What is the purpose of decanting a trust?
The purpose of decanting is to transfer assets from one trust into another with different or updated terms. This allows trustees to modernize provisions, correct errors, adapt to changes in law or family circumstances, or strengthen the structure without needing court approval.
Why would a trustee choose to decant a trust instead of amending it?
Amendments often require consent from beneficiaries, approval from a protector, or a court order. Decanting uses a trustee’s discretionary distribution powers to move assets into a new trust, avoiding those hurdles and giving more flexibility, especially for irrevocable trusts that cannot otherwise be amended.
Is decanting the same as creating a new trust?
Decanting is not the same as creating a new trust, but it can involve creating one. A receiving trust may be newly settled or already in existence. The distinction is that the assets are transferred from an existing trust under trustee authority, rather than being placed directly by a settlor.
Can any trust be decanted?
No. A trust can only be decanted if the trustee holds sufficient discretionary powers over income or principal. Trusts with rigid distribution requirements or explicit prohibitions on transfer cannot be decanted.
Can you decant an irrevocable trust?
Yes. Decanting is most commonly applied to irrevocable trusts, because they cannot otherwise be amended. Trustees can use decanting to restructure terms while keeping the trust effective.
Who decides if a trust can be decanted?
The trustee makes the decision, but only after reviewing the trust deed, statutory authority, and fiduciary duties. In some cases, a protector or co-trustee may need to approve the decision if the deed requires it.
Does decanting modify the original trust?
No. Decanting does not amend the original trust instrument. Instead, assets are distributed into a separate trust with updated terms, while the original trust remains in existence.
Does the original trust continue after decanting?
Yes. The original trust still exists after decanting, but it may hold no assets if all property has been transferred to the receiving trust. In such cases, the original trust can become dormant or be wound up.
Who is the grantor of a decanted trust?
The original settlor remains the grantor, because the assets being decanted originated from the first trust they established. The trustee does not become the grantor by exercising decanting powers.
How are beneficiaries affected by decanting?
Beneficiaries may see their rights adjusted, expanded, or modernized depending on the terms of the receiving trust. However, vested rights and mandatory entitlements cannot be overridden. Decanting can also add new provisions, such as a special needs clause, to better meet beneficiary needs.
Do beneficiaries need to consent to a decanting?
Beneficiary consent is not usually required, since decanting relies on trustee discretion. However, trustees often provide notice, and in some jurisdictions consent may be necessary if the trust deed or statute requires it.
Does decanting affect the settlor’s original intent?
Decanting must be exercised in a way that respects the settlor’s intent. While terms can be modernized, trustees cannot use decanting to undermine the fundamental purpose of the trust or to disregard clear restrictions in the deed.
Is decanting a trust a taxable event?
Decanting can trigger tax consequences depending on the jurisdiction. In some cases, transferring assets into a new trust may be treated as a disposition for income tax or capital gains purposes. Cross-border decanting can also raise reporting obligations under FATCA or CRS. Professional tax advice is essential before proceeding.
What are the risks of decanting a trust?
Risks include challenges from beneficiaries, tax liabilities, and possible recognition issues in other jurisdictions. If trustees overstep their authority, the decanting could be set aside by a court, exposing the trustee to liability.
Can a US trust be decanted into another jurisdiction?
Sometimes. U.S. state statutes vary: some permit transfers to foreign trusts, while others restrict decanting to domestic receiving trusts. Court approval may also be required.
Can a trust from another jurisdiction be decanted into Nevis?
Yes, provided the originating trust’s governing law and deed allow distributions to another trust. The new receiving trust would need to be settled in Nevis under NIETO. Court approval might be necessary in the exporting jurisdiction.
Does Nevis law allow trust decanting?
Yes. NIETO expressly authorizes trustees with discretionary distribution powers to transfer assets to another trust, which is the statutory basis for decanting in Nevis.
What statute governs trust decanting in Nevis?
The Nevis International Exempt Trust Ordinance (NIETO, CAP 7.03N), specifically Section 8A, provides the authority for trustees to transfer income or principal for the benefit of a beneficiary, including into another trust.
How does Nevis compare to other jurisdictions for decanting?
Nevis places decanting powers directly in statute, so trustees act under express authority without needing court approval or registry filings. By contrast, many offshore jurisdictions rely more heavily on court oversight, and U.S. states apply varying statutory requirements.
