Georgia residents often include irrevocable trusts in their estate plans because they protect assets from creditors and provide a number of tax benefits. Irrevocable trusts reduce estate tax exposure because the assets placed into them are no longer considered part of the estate as they are no longer owned by the grantor, but the nature of these documents makes changing their terms difficult. However, there are a number of ways that grantors may be able to make irrevocable trusts more flexible.
One way to provide flexibility is to draft an irrevocable trust that is discretionary. This arrangement leaves decisions about investments and distributions up to the trustee, and it can be particularly useful when beneficiaries have been irresponsible with money in the past. Grantors can choose to give trustees full discretion or include language that sets standards trustees must abide by.
Another way to adapt to changing situations is to distribute the assets from an irrevocable trust into a new trust using a process known as decanting. Decanting allows beneficiaries to be added or removed and the terms of trusts to be revised in light of new tax laws. This practice is common in many parts of the country but was not permitted in Georgia until July 2018. That was when the provisions of Georgia House Bill 121, which was signed into law by Gov. Nathan Deal on May 3, went into effect.
Experienced estate planning attorneys may also suggest appointing a trust protector. Trust protectors watch over trusts and may be able to deal with problems that grantors could not have envisioned when the trust documents were drafted. Designating a trust protector could be an especially prudent step to take when trusts are likely to be in effect for long periods and the chances that situations will change are high.
Source: The Georgia General Assembly, “House Bill 121”