Decanting is not just for fine Cabernet.??Decanting has grown in popularity as a method to revise an otherwise unrevisable, irrevocable trust.??In this context, “decanting” means transferring some or all of the assets from one trust into another. At last count, 18 states have adopted decanting statutes, with considerable variations from state to state.??Almost all of the states, however, require at least notice to the beneficiaries, and some require the beneficiaries’ written consent.
The IRS recognized this growing tide of decanting, and issued Notice 2011-101, asking for comments on the income, estate and gift tax implications of decanting.??Comments were due by April 25, 2012. In addition, the IRS included a decanting issue — specifically, whether a change in beneficial interest is a distribution for which a deduction is allowable under §661 of the Internal Revenue Code, or which requires an amount to be included in a person’s gross income under §662 — in Rev. Proc. 2013-3, 2013-1 I.R.B. 113, as an area under study, in which private letter rulings or determination letters will not be issued until a revenue ruling, revenue procedure or regulation is issued by the IRS.??Presumably, letter rulings may still be issued on other questions involving decanting.
