Let’s get one thing out of the way up-front: This blog post has nothing to do with wine.
Rather, let’s talk about trust decanting, or the fiduciary exercise of broad discretionary powers of distribution to create new trusts for one or more beneficiaries of an existing trust. In other words, the distribution of assets from one trust into a second trust, just as wine may be decanted from a bottle into another vessel.
It’s a form of trust modification that’s available to fiduciaries now in Massachusetts. Decanting can be a useful strategy for changing the outdated terms of an otherwise-irrevocable trust—for example, to provide for a beneficiary who becomes disabled after the settlor executes the original trust—but it can also defeat a settlor’s intent, so rules are needed to prevent such abuse.
However, the law on decanting in Massachusetts—what can and can’t be done, under what circumstances—is far from clear.
This situation has confounded practitioners, who don’t know whether a specific modification is proper until the courts weigh in—and who may therefore refrain from taking certain appropriate steps out of fear of litigation. It also poses traps for the unwary and creates an incentive for settlors and testators to establish trusts elsewhere, in a state such as New Hampshire whose trusts law is more modern and can thus provide greater assurance.
Of course, this issue is not new to the BBA. In 2013, we filed an amicus brief to the SJC in Richard Morse, Trustee v. Jonathan A. Kraft, et al. That case addressed, for the first time in Massachusetts, a trustee’s power to transfer the assets of one irrevocable trust to another for the same class of beneficiaries. The BBA’s brief argued in favor of this power to decant, and urged the Court to recognize that it is inherently held by trustees.
The SJC did rule favorably with respect to Morse’s petition—recognizing the authority of trustees to decant where the terms of a particular trust and the surrounding circumstances indicate that decanting is consistent with the trust settlor’s intent—but declined to recognize decanting as an inherent trustee power, essentially preserving the current limbo.
Since that decision, the BBA has hosted numerous CLE and other events on the topic, and next month we will host an event titled “Decanting, Non-Judicial Settlement Agreements and Other Trust Amendment Alternatives.”
Into this uncertainty stepped the independent Standing Committee on Massachusetts Legislation Relating to Wills, Trusts, Estates and Fiduciary Administration (which you may remember from its work on the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA). That group of trust experts—which includes Stacy Mullaney of Fiduciary Trust, BBA Trusts & Estates Section Co- Chair, and Brad Bedingfield of Hemenway & Barnes, Trusts & Estates Section Public Policy Committee Co-Chair—spent more than year poring over the Uniform Law Commission’s model language to develop a Massachusetts-specific version of the Uniform Trust Decanting Act (UTDA), which was designed to create a national framework for practitioners facing questions of how best to accomplish trust decanting.
Last month, on the recommendation of the Trusts & Estates Section, the BBA Council endorsed their work, and we will now make the case to the Legislature that they should adopt this UTDA as part of the existing Massachusetts Uniform Trust Code, joining the other half of the states that have taken similar steps to date—enacting either UTDA or their own decanting statutes.
This proposed Act represents a piece of legislation (now filed by Senator Cynthia Stone Creem) that has been deeply vetted, fits a known need, and will ensure that practitioners in the Commonwealth have at least the same level of statutory clarity on this issue as those in the majority of other states throughout the country. If it’s enacted, Massachusetts practitioners will be free to continue to decant trusts under common law, if that makes the best sense for a client or situation; they will, however, have an alternative and clear guidance concerning how to decant properly in accordance with the statute.
Government Relations Director
Boston Bar Association