Trust Decanting in New York: Modernizing Irrevocable Trusts Under EPTL 10-6.6

An irrevocable trust, once established, is meant to be permanent. Yet circumstances change. A trust drafted decades ago may contain outdated provisions, obsolete distribution standards, or administrative terms that no longer serve the family. The trust document may fail to anticipate disability, changed tax laws, or the need for protection against creditors. Judicial modification is possible but expensive, public, and uncertain.

New York offers an alternative. Under EPTL 10-6.6, a trustee with appropriate authority can “decant.” That is, the trustee distributes assets from an existing trust into a newly created trust with different, often more favorable terms. This statute, among the earliest of its kind in the nation, is a powerful tool for modernizing irrevocable trusts without the cost, delay, and publicity of court proceedings.

This guide covers the New York decanting statute in full: what it permits, what it prohibits, the procedural requirements, the tax implications, and when decanting makes sense for Westchester County families.

What Is Trust Decanting?

Decanting is a metaphor drawn from wine-making. When a winemaker wishes to transfer wine from one vessel to another, leaving sediment behind, improving aeration, or refining the presentation, the wine is decanted. In trust law, decanting refers to a trustee’s exercise of discretionary distribution powers to transfer assets from an existing trust into a new trust with modified terms.

The power is entirely contractual: it derives from the original trust agreement, the trustee’s fiduciary discretion, and the statutory framework. The trustee is not creating new rights or distributing assets to new beneficiaries outside the original trust circle. Rather, the trustee is exercising an existing power to distribute to beneficiaries (or potential beneficiaries) of the original trust and directing those distributions to flow into a newly drafted trust with updated terms.

The result is a modernized trust structure without judicial involvement. Drafting errors can be fixed, administrative provisions can be updated, distribution standards can be clarified, trustee succession can be revised, and protective provisions can be added, all while preserving the original trust’s fundamental purpose and tax status.

The Statutory Framework: EPTL 10-6.6

New York’s trust decanting statute, codified in EPTL 10-6.6, was enacted in 1992, making New York one of the first jurisdictions to authorize decanting. The statute has been amended multiple times since its enactment, most significantly in 2010, to address questions about the scope of decanting authority and the procedures required.

EPTL 10-6.6 recognizes two categories of trustees: those with unlimited discretion and those with limited discretion. The scope of decanting authority depends on which category applies.

Unlimited Discretion Trustees

An unlimited discretion trustee is one whose discretionary distribution powers are not limited by an ascertainable standard. This includes trustees with power to distribute principal “for any reason” or “in the trustee’s sole discretion,” without reference to the beneficiary’s health, education, maintenance, or support.

An unlimited discretion trustee may exercise that power to distribute to the beneficiary of the original trust or to the current and future beneficiaries of the original trust by causing those assets to be held in a new trust with virtually any terms the trustee (and the beneficiary, if the beneficiary consents) may choose.

The statute does impose two meaningful limitations:

No new beneficiaries. The new trust cannot benefit any person who was not a beneficiary (including a potential beneficiary) of the original trust. If the original trust benefited only the settlor’s children, the new trust cannot add the settlor’s grandchildren as beneficiaries, even though those grandchildren might have been potential beneficiaries had the original trust included a power of appointment.

No perpetuities extension. The new trust cannot extend beyond the perpetuities period of the original trust. If the original trust was limited to the life of the settlor’s children plus 21 years, the new trust must be similarly limited. This requirement ensures that decanting does not convert a trust that would otherwise have terminated into a perpetual dynasty trust.

Subject to these constraints, an unlimited discretion trustee may completely rewrite the trust. Administrative provisions may be modernized. Trustee succession may be revised. A supplemental needs trust or creditor-protection provisions may be added for a beneficiary who becomes disabled. Distribution standards may be clarified or updated. The trust situs may be changed to a different state. Multiple trusts may be consolidated, or a single trust may be divided into several.

Limited Discretion Trustees

A limited discretion trustee is one whose distribution powers are constrained by an ascertainable standard (typically the beneficiary’s health, education, maintenance, or support). Such trustees have much more restricted decanting authority.

A limited discretion trustee may decant into a new trust, but the new trust must grant the beneficiaries only the same or more restrictive interests compared to the original trust. If the original trust allows distributions for “health, education, maintenance, and support,” the new trust cannot broaden that standard to include “any purpose” or “in the trustee’s sole discretion.” The new distribution standards must be equal to or narrower than the original.

In practical terms, this means a limited discretion trustee can use decanting to fix drafting errors, update administrative provisions, or change trustee succession, but cannot fundamentally expand the beneficiaries’ rights to distributions. The constraint is significant but not crippling, as many important improvements to an older trust can be accomplished within this boundary.

Common Reasons to Decant

Westchester families typically pursue trust decanting for one or more of the following reasons:

Drafting errors and ambiguities. An older trust may contain language that is unclear, outdated, or unworkable. A trust drafted before the recognition of same-sex marriage, for example, might contain provisions that no longer align with the family’s actual intentions or New York law. Decanting allows these provisions to be clarified without judicial proceedings.

Trustee succession. The original trust may have named a trustee who is no longer willing or able to serve, and the trust may lack adequate successor trustee provisions. Decanting can establish new trustee succession rules to ensure continuity of professional management.

Administrative modernization. A trust drafted in 1990 may lack provisions addressing digital assets, directed trustees, trust protectors, or other modern administrative concepts. Decanting allows these provisions to be added without discarding the entire trust.

Supplemental needs provisions. If a beneficiary becomes disabled after the original trust was drafted, decanting allows the trustee to add supplemental needs provisions that protect government benefits (SSI, Medicaid) while providing for the beneficiary’s comfort and quality of life.

Creditor protection. An older trust may have been drafted as a simple revocable trust and funded without asset protection in mind. Decanting can add spendthrift provisions, self-settled trust protections (if permissible), or other creditor-shielding language.

Trust situs changes. If a trustee relocates, or if a more favorable trust jurisdiction becomes available, decanting can move the trust situs to a different state while preserving the original trust’s terms and tax status. This is particularly useful when transitioning from an income-producing jurisdiction to a state with better trust tax treatment.

Consolidation or division. If a family has multiple trusts from different settlors or created at different times, decanting can consolidate them into a single trust for administrative efficiency. Conversely, a large trust may be divided into separate trusts for each branch of the family.

Tax optimization. Decanting can restructure a trust to take advantage of tax developments, QTIP election opportunities, or grantor trust status that was not available under the original trust.

Procedural Requirements: Notice and Consent

EPTL 10-6.6 imposes important procedural requirements that govern the decanting process.

Notice to interested persons. Before decanting, the trustee must give written notice to all “interested persons” of the decanting and of the terms of the new trust. “Interested persons” includes the current beneficiaries and any potential beneficiaries (such as remaindermen or holders of powers of appointment). The notice must be given at least 30 days before the decanting is effective.

The 30-day period is a grace period; it is not a consent period. The interested persons do not need to approve the decanting. However, any interested person who objects to the decanting has an opportunity to seek judicial review under SCPA 1426 (the CPLR’s provision for objecting to fiduciary actions).

Notice to the Attorney General. If the original trust includes charitable interests (such as a charitable remainder or a charitable distribution at the death of a life beneficiary), the trustee must also notify the New York Attorney General of the decanting, at least 30 days before it is effective.

Notice content. The notice must identify the original trust, explain the decanting, describe the material terms of the new trust, and inform the interested persons of their right to object. The statute does not prescribe the exact format; prudent trustees typically include a copy of the new trust agreement with the notice.

Manner of notice. The statute requires “written notice,” but does not mandate personal service. Notice by mail to the last known address is typically sufficient, provided a trustee can demonstrate that the notice was properly mailed.

Waiver of notice. An interested person may waive notice in writing. If all interested persons waive notice, the decanting may proceed immediately without waiting for the 30-day period to elapse.

These procedural requirements are mandatory. A decanting conducted without proper notice is subject to challenge and may be invalid.

Tax Considerations

One of the most important questions in decanting is whether the transfer of assets from the original trust to the new trust triggers income tax, estate tax, or gift tax consequences.

Income tax. The IRS has held that a properly executed decanting is not a taxable event. In Private Letter Ruling 200916031, the Service confirmed that assets transferred from an existing trust to a new trust pursuant to a decanting exercised within the scope of the trustee’s authority do not constitute a taxable distribution to the beneficiary. The beneficiary does not recognize income.

The reasoning is straightforward: the trustee is exercising an existing power to distribute. The fact that the distribution flows into a newly drafted trust, rather than to the beneficiary directly, does not change the tax character of the distribution. So long as the new trust is drafted to be a “grantor trust” (if the original trust was) or is properly structured to maintain continuity of trust tax status, the decanting should not create adverse income tax consequences.

Estate and gift tax. Similarly, decanting should not trigger estate or gift tax consequences if executed properly. The beneficiary is not receiving a new beneficial interest; the beneficiary’s beneficial interest in the original trust is simply being relocated to a new vehicle. The new trust should not be includible in any estate, and the transfer should not be treated as a gift for federal gift tax purposes.

However, care is required. The IRS has issued guidance (Revenue Ruling 2015-10, by analogy from a ruling on qualified charitable distributions) suggesting that decanting could trigger adverse tax consequences if it improperly expands the beneficiary’s rights or violates the doctrines of equitable estoppel or perpetuities. Decanting should be undertaken with competent tax counsel to ensure the new trust is structured to maintain the original trust’s tax status.

State income tax. As a beneficiary’s state income tax residency may affect trust income taxation under EPTL 104(5.3), decanting to a new trust situs can have significant state tax implications. A trust situs in a state with no income tax (such as Florida or Nevada) may offer substantial state income tax savings to beneficiaries. This is one of the most important reasons for decanting, particularly when combined with a trustee relocation to the favorable jurisdiction.

Limitations and Prohibitions

While EPTL 10-6.6 is broad, it does contain important limitations.

Cannot reduce fixed income interests. A trustee cannot decant in a way that reduces a beneficiary’s fixed income interest. If the original trust directs the trustee to pay $10,000 per month to a life beneficiary, the new trust cannot reduce that amount to $5,000 per month. The beneficiary’s income interest is contractual; decanting cannot impair it.

Cannot eliminate presently exercisable powers of appointment. If the original trust grants a beneficiary a presently exercisable general or special power of appointment, the new trust cannot eliminate or reduce that power. Decanting can shift the power to a new trust, but cannot diminish it.

Cannot benefit the trustee. The trustee cannot use decanting to benefit itself or pay itself excessive compensation. Decanting must be exercised in the best interests of the trust and its beneficiaries, not for the trustee’s personal gain.

Cannot add new beneficiaries (for unlimited discretion trustees, as discussed above).

Cannot extend the perpetuities period (as discussed above).

Cannot circumvent tax law. Decanting cannot be used to avoid income, estate, or gift tax in violation of law. The structure of the new trust must comply with all applicable tax statutes and regulations.

Decanting vs. Judicial Modification

Decanting is not the only way to modify an irrevocable trust. SCPA 1418 permits a court to modify or terminate an irrevocable trust if the trust’s purposes have become impossible, impracticable, or illegal, or if the terms are inconsistent with the settlor’s intent. In addition, SCPA 3311 permits a court to approve a modification agreed to by the settlor (if competent) and the interested parties.

Decanting and judicial modification serve different purposes and have different advantages and disadvantages.

Decanting advantages: Decanting is private, fast, and inexpensive. There is no court involvement, no litigation risk, and no public record. The trustee needs only to give notice to interested persons and wait (or obtain waivers). Decanting can be completed in weeks, not months or years. There is no court filing fee, and legal costs are typically modest.

Judicial modification advantages: Judicial modification may be necessary if the trustee lacks authority to decant (for example, if the trustee is a limited discretion trustee and the intended modification goes beyond the scope of limited discretion authority). Judicial modification also provides certainty. If a court approves a modification, it is unlikely to be challenged. Finally, judicial modification can accomplish changes that decanting cannot, such as extending the perpetuities period, adding new beneficiaries to an unlimited discretion trustee’s decanting authority, or modifying a fixed income interest.

For most Westchester families with older trusts, decanting is the preferred approach: faster, less expensive, and more private than court proceedings. But families should understand the distinction and ensure that the intended modification falls within the scope of decanting authority before pursuing this course.

Practical Considerations for Westchester Families

Decanting is particularly relevant for Westchester County families with irrevocable trusts created or funded decades ago.

Review the trust document. The first step is to read the original trust carefully and identify the trustee’s distribution powers. Are they unlimited, or are they subject to an ascertainable standard? If the language is ambiguous, seek a legal opinion. The scope of the trustee’s authority determines what decanting can accomplish.

Identify the intended improvements. What specific provisions in the original trust are problematic? Is there outdated language? Are there gaps in trustee succession? Would supplemental needs provisions, creditor protection, or administrative modernization be valuable? Clarity on the intended improvements will guide the design of the new trust.

Consider tax implications. If the original trust is a grantor trust, will the new trust maintain grantor trust status? If trust situs is being changed, how will this affect state income taxation? A competent tax advisor should review the decanting plan.

Gather and notify interested persons. Identify all current and potential beneficiaries. Prepare a clear notice explaining the decanting and the material terms of the new trust. Provide 30 days’ notice (or obtain waivers from interested persons), and notify the Attorney General if charitable interests are involved.

Draft the new trust carefully. The new trust should be drafted with the same care as an original trust. It should incorporate the favorable provisions of modern trust practice, address the specific concerns that motivated the decanting, and be structured to maintain the original trust’s tax status. Do not use a template or form document; engage a qualified estate planning attorney.

Execute the decanting. Once the notice period has elapsed (or waivers have been obtained), the trustee executes the decanting by signing the documents that transfer the assets from the original trust to the new trust.

Maintain records. The trustee should maintain comprehensive records of the decanting process, including the notice provided, any waivers obtained, the date notice was given, and the date the new trust was funded. These records are important for defending the decanting if it is ever challenged.

When Decanting Is Not Appropriate

Decanting is a powerful tool, but it is not appropriate in every situation.

If the trustee lacks sufficient authority under the trust agreement, decanting should not be pursued without additional authority from the settlor (if competent) or the court.

If the intended modification goes beyond the scope of the trustee’s authority (for example, if a limited discretion trustee intends to eliminate an ascertainable standard), judicial modification may be necessary.

If the trust beneficiaries are in active dispute about the desired changes, and some beneficiaries would object to the decanting, litigation risk may be high. An interested person may file an objection under SCPA 1426 and seek judicial review of the decanting. If the decanting goes beyond the trustee’s authority, the court may set it aside.

If the trust is the subject of pending litigation, or if the settlor is incompetent and a guardianship or conservatorship is pending, decanting should be delayed until the litigation or guardianship is concluded.

The Bottom Line

EPTL 10-6.6 provides a straightforward, efficient mechanism for modernizing irrevocable trusts without judicial involvement. For Westchester County families with older trusts, decanting can fix drafting errors, update administrative provisions, add protective features, and adapt trust terms to changed circumstances, all while preserving the original trust’s tax status and fundamental purpose.

Decanting requires careful attention to procedural requirements (notice and consent), clear identification of the trustee’s authority, and thoughtful planning of the new trust structure. But when executed properly, it is an invaluable estate planning tool.

Consult an Attorney

Trust decanting involves complex questions of trust law, tax law, and fiduciary responsibility. If you are a trustee considering decanting, or a beneficiary of a trust that might benefit from decanting, contact a qualified estate planning attorney. An attorney experienced in trust administration can review your trust, explain your options, and guide you through the decanting process.

For Westchester County families, trust decanting is often the most efficient path to modernizing older trusts. But it should never be undertaken without competent legal counsel.