Pub. 2 2020 Issue 6

N O V E M B E R / D E C E M B E R 2 0 2 0 10 nebraska cpas C O U N S E L O R ’ S C O R N E R On August 15, 2020, Gov. Pete Ricketts signed LB 808 into law, introducing the Uniform Trust Decanting Act (UTDA) to Nebraska, with an effective date of November 13, 2020. 1 Nebraska now becomes the 10th state in the union to enact the UTDA, and one of 31 states to enact specific legislation relating to trust decanting. With local decanting legislation now on the books, Nebraska practitioners are likely eager to understand the potential uses, benefits, and risks of decanting. More Efficient Modification Decanting is a mechanism for irrevocable trust modif ication whereby the trustee can “pour” the assets of an ill-f itting, inf lexible, or otherwise def icient trust into a “new” trust with modif ied or improved terms intended to better suit the needs of the involved par ties. In the past, achieving such modif ication required judicial involvement, reliance on non- judicial set t lement agreements, or the exercise of special powers of appointment. In this regard, decanting provides a streamlined (and likely more cost-effective) tool to achieve irrevocable trust modif ication. Procedural Considerations & Implementation Although the UTDA provides a clear and relatively concise roadmap, practitioners and fiduciaries must still adhere to best practices. Preparation of a formal resolution containing background information and recitals setting forth the specific decanting actions that will be taken, delivery of notice in accordance with the statutory requirements, and, in instances involving a second trust, careful effectuation of the asset transfers to be completed as part of the decanting process should all be carefully carried out. It should be noted that “private decanting”—that is, decanting without a requirement that notice is provided to the trust beneficiaries—is not permitted under Nebraska’s version of the UTDA. 2 Additionally, the UTDA provides that a trustee’s discretionary authority will impact the extent of a fiduciary’s decanting power, so trust drafters should carefully weigh settlor intent with the impact that discretionary provisions may have on future ability to decant. 3 Uses & Benefits of Decanting Trust f iduciaries and benef iciaries in Nebraska will benef it from an increased abi l ity to adapt to new norms in trust administration and changes in law. Looking broadly, trust decanting can be carried out to (i) change administrative provisions, (ii) further settlor intent, (iii) change or modify fiduciaries, (iv) divide, merge, or consolidate trusts, (v) correct scrivener’s errors or drafting ambiguities, (vi) modify beneficiary BY ALEXANDER J. WOLF, ANTHONY P. DELUCA & NICHOLAS W. O’BRIEN, KOLEY JESSEN NEBRASKA UNIFORM TRUST DECANTING ACT: A NEW TRUST MODIFICATION TOOL