New Hampshire Revised Statutes 564-B:4-418 – Trustee’s Power to Decant Trust
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(a) Subject to the limitations provided in this section, a trustee has the power to decant a trust. The power to decant is the power to appoint some or all of the trust property of a trust (“first trust”) to another trust (“second trust”). A trustee’s power to decant is a power with respect to an administrative matter of the trust.
(a-1)(1) For purposes of this section, “second trust” means: (A) an irrevocable trust already in existence, whether created by the settlor of the first trust or a different settlor; (B) a trust that is a complete restatement of the first trust, which may be created by the authorized fiduciary of the first trust or another person as the nominal grantor; (C) the first trust as modified to create the second trust; or (D) a new trust created by the authorized fiduciary or another person as the nominal settlor for the purpose of decanting.
(2) If a second trust is created by restating or modifying the first trust: (A) the second trust may, but need not, have the same name as the first trust; and (B) the second trust may, but need not, obtain a new taxpayer identification number. If no new taxpayer identification number is obtained, the second trust may continue to use the taxpayer identification number of the first trust.
(b)(1) The beneficiaries of the second trust may include only one or more of the beneficiaries of the first trust.
(2) The second trust may exclude one or more of the beneficiaries of the first trust.
(3) A person is not a beneficiary of the second trust solely by reason of being a permissible appointee of a power of appointment under the terms of the second trust.
(4) The current distributees and current permissible distributees of the second trust may include one or more persons who, under the terms of the first trust, are not current distributes or current permissible distributes, but would be distributees or permissible distributees upon the occurrence of a future date or event.
(c) Under the terms of the second trust, a person may have a power of appointment if (1) that person was a beneficiary of the first trust or (2) under the terms of the first trust, that person held a power of appointment either in a fiduciary or nonfiduciary capacity.
(d) Except as otherwise provided in this subsection, the terms of the second trust may provide that a trustee has discretion to distribute income or principal, and the terms of the second trust may impose a standard or no standard on the trustee’s discretion regardless of whether the terms of the first trust imposed a standard on the trustee’s discretion to distribute income or principal. If the first trust is a charitable trust and the terms of the first trust impose a standard on the trustee’s discretion to distribute income or principal, then the terms of the second trust shall impose the same standard on the trustee’s discretion to distribute income or principal, unless the director of charitable trusts expressly consents to the modification or elimination of that standard.
(e) The second trust may have a term that is longer than the first trust.
(f) A trustee may not decant to the extent that the terms of the second trust are inconsistent with a material purpose of the first trust.
(g)(1) A trustee may not decant to the extent that the terms of the second trust reduce or eliminate a vested interest of a beneficiary of the first trust.
(2) A vested interest is:
(A) a current right to a mandatory distribution of income or principal, a mandatory annuity interest, or a mandatory unitrust interest;
(B) a currently-exercisable power of withdrawal; or
(C) a noncontingent, unconditional right to receive an ascertainable portion of the trust property upon the trust’s termination.
(3) In addition to other possible contingencies, a beneficiary’s right to receive a portion of the trust property upon the trust’s termination is contingent if, by reason of the trustee’s discretionary power to make distributions or under other terms of the trust, any person other than the beneficiary or the beneficiary’s estate could receive that portion unless the beneficiary survives a specified date or a specified event.
(h) If a transfer to the first trust qualified for a deduction, credit, exclusion, or exemption for purposes of any income, gift, estate, or generation-skipping transfer tax, then a trustee may decant only to the extent that the decanting would not jeopardize that deduction, credit, exclusion, or exemption.
(i) If a settlor of the first trust or a beneficiary of the first trust is an applicant for public benefits or receives public benefits and the settlor’s or beneficiary’s eligibility or qualification for those public benefits is dependent on the nature and scope of his or her rights, powers, and interests in the first trust, then a trustee may decant only to the extent that the decanting would not jeopardize the settlor’s or beneficiary’s eligibility or qualification for those public benefits.
(j) A trustee may not decant to the extent that, under the terms of the second trust:
(1) one or more beneficiaries can remove the trustee;
(2) those beneficiaries can appoint a successor trustee who, with respect to any of them, is a related or subordinate party within the meaning of section 672(c) of the Internal Revenue Code;
(3) the trustee may distribute trust property to any one or more of those beneficiaries; and
(4) the trustee’s discretion to make those distributions is not limited by an ascertainable standard.
(k) A trustee who is a beneficiary of the first trust does not have the power to decant to the extent that, under the terms of the first trust:
(1) the trustee does not have the discretion to make or participate in making distributions to himself or herself unless the terms of the second trust impose the same limitation on that trustee’s discretion;
(2) the trustee’s discretion to make or participate in making distributions to himself or herself is limited by an ascertainable standard unless the terms of the second trust impose the same limitation on that trustee’s discretion;
(3) the trustee’s discretion to make or participate in making distributions to himself or herself is exercisable only with the consent of a cotrustee or a person holding an adverse interest, unless the terms of the second trust impose the same limitation on that trustee’s discretion; or
(4) the trustee does not have the discretion to make or participate in making distributions in a manner that will discharge his or her legal support obligations, unless the terms of second trust impose the same limitation on that trustee’s discretion.
(l) A trustee is not prohibited from decanting solely because:
(1) the first trust is irrevocable;
(2) the terms of the first trust provide that the trust may not be amended or modified;
(3) the first trust contains a spendthrift provision;
(4) under the terms of the first trust, the trustee does not have any discretion in making distributions of income or principal; or
(5) except as provided in subsection (d), the terms of the first trust impose a standard on the trustee’s discretion to distribute income or principal.
(m) A trustee of a charitable trust or a trust in which a charitable organization has a vested interest shall notify the director of charitable trusts of a proposed decanting, and the trustee shall provide that notice in writing at least 30 days before the effective date of the decanting. A trustee of a noncharitable trust may notify a beneficiary of a proposed decanting, but does not have any duty to do so. The right of any beneficiary to object to a proposed decanting terminates if the beneficiary does not notify the trustee of an objection within 60 days after the proposal was sent to the beneficiary but only if the proposal informed the beneficiary of the right to object and the time allowed for objection.
(n) A trustee’s power to decant may be expanded, restricted, eliminated, or otherwise altered by the terms of the trust. A nonjudicial settlement agreement made in accordance with N.H. Rev. Stat. § 564-B:1-111, however, may only restrict or eliminate a trustee’s power to decant. Except as otherwise provided under the terms of the trust, a trustee’s power to decant is in addition to any other powers conferred by the terms of the trust, this chapter, or the laws of this state. This section does not expand, restrict, eliminate, or otherwise alter any power that, with respect to a trust, a person holds in a nonfiduciary capacity.
(o) A trustee does not have a duty to decant or an ongoing duty to consider whether to decant. In exercising the power to decant, a trustee has a duty to exercise the power in a manner that is consistent with the settlor’s intent as expressed in the terms of the trust, and the trustee shall act in accordance with the trustee’s duties under this chapter and the terms of the first trust.
(p) A trustee may exercise the power to decant, without court approval, the consent of the settlor, or the consent of any of the beneficiaries of the first trust. A trustee or any other interested person may ask a court to approve a trustee’s exercise of the power to decant.
(q) Upon a decanting in which all of the first trust’s property is appointed to the second trust, the following shall apply:
(1) The first trust shall terminate;
(2) The terms of the second trust shall govern the second trust and its property, including any property acquired from the first trust;
(3) All title to real property and other property owned by the first trust and all contractual rights possessed by the first trust are vested in the second trust without reversion or impairment, subject to the provisions of paragraph (b); and
(4) All liabilities of the first trust are vested in the second trust.
(r) After a decanting in which all of the first trust’s property is appointed to the second trust, the name of the trustee of the second trust may be substituted in any pending proceeding for the name of the trustee of the first trust.
(a-1)(1) For purposes of this section, “second trust” means: (A) an irrevocable trust already in existence, whether created by the settlor of the first trust or a different settlor; (B) a trust that is a complete restatement of the first trust, which may be created by the authorized fiduciary of the first trust or another person as the nominal grantor; (C) the first trust as modified to create the second trust; or (D) a new trust created by the authorized fiduciary or another person as the nominal settlor for the purpose of decanting.
Terms Used In New Hampshire Revised Statutes 564-B:4-418
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Dependent: A person dependent for support upon another.
- Fiduciary: A trustee, executor, or administrator.
- following: when used by way of reference to any section of these laws, shall mean the section next preceding or following that in which such reference is made, unless some other is expressly designated. See New Hampshire Revised Statutes 21:13
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Grantor: The person who establishes a trust and places property into it.
- Irrevocable trust: A trust arrangement that cannot be revoked, rescinded, or repealed by the grantor.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- person: may extend and be applied to bodies corporate and politic as well as to individuals. See New Hampshire Revised Statutes 21:9
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- spendthrift: shall include anyone who is liable to be put under guardianship on account of excessive drinking, gaming, idleness, debauchery or vicious habits of any kind, or who is unable to manage his affairs with prudence. See New Hampshire Revised Statutes 21:19
- state: when applied to different parts of the United States, may extend to and include the District of Columbia and the several territories, so called; and the words "United States" shall include said district and territories. See New Hampshire Revised Statutes 21:4
- Trustee: A person or institution holding and administering property in trust.
(2) If a second trust is created by restating or modifying the first trust: (A) the second trust may, but need not, have the same name as the first trust; and (B) the second trust may, but need not, obtain a new taxpayer identification number. If no new taxpayer identification number is obtained, the second trust may continue to use the taxpayer identification number of the first trust.
(b)(1) The beneficiaries of the second trust may include only one or more of the beneficiaries of the first trust.
(2) The second trust may exclude one or more of the beneficiaries of the first trust.
(3) A person is not a beneficiary of the second trust solely by reason of being a permissible appointee of a power of appointment under the terms of the second trust.
(4) The current distributees and current permissible distributees of the second trust may include one or more persons who, under the terms of the first trust, are not current distributes or current permissible distributes, but would be distributees or permissible distributees upon the occurrence of a future date or event.
(c) Under the terms of the second trust, a person may have a power of appointment if (1) that person was a beneficiary of the first trust or (2) under the terms of the first trust, that person held a power of appointment either in a fiduciary or nonfiduciary capacity.
(d) Except as otherwise provided in this subsection, the terms of the second trust may provide that a trustee has discretion to distribute income or principal, and the terms of the second trust may impose a standard or no standard on the trustee’s discretion regardless of whether the terms of the first trust imposed a standard on the trustee’s discretion to distribute income or principal. If the first trust is a charitable trust and the terms of the first trust impose a standard on the trustee’s discretion to distribute income or principal, then the terms of the second trust shall impose the same standard on the trustee’s discretion to distribute income or principal, unless the director of charitable trusts expressly consents to the modification or elimination of that standard.
(e) The second trust may have a term that is longer than the first trust.
(f) A trustee may not decant to the extent that the terms of the second trust are inconsistent with a material purpose of the first trust.
(g)(1) A trustee may not decant to the extent that the terms of the second trust reduce or eliminate a vested interest of a beneficiary of the first trust.
(2) A vested interest is:
(A) a current right to a mandatory distribution of income or principal, a mandatory annuity interest, or a mandatory unitrust interest;
(B) a currently-exercisable power of withdrawal; or
(C) a noncontingent, unconditional right to receive an ascertainable portion of the trust property upon the trust’s termination.
(3) In addition to other possible contingencies, a beneficiary’s right to receive a portion of the trust property upon the trust’s termination is contingent if, by reason of the trustee’s discretionary power to make distributions or under other terms of the trust, any person other than the beneficiary or the beneficiary’s estate could receive that portion unless the beneficiary survives a specified date or a specified event.
(h) If a transfer to the first trust qualified for a deduction, credit, exclusion, or exemption for purposes of any income, gift, estate, or generation-skipping transfer tax, then a trustee may decant only to the extent that the decanting would not jeopardize that deduction, credit, exclusion, or exemption.
(i) If a settlor of the first trust or a beneficiary of the first trust is an applicant for public benefits or receives public benefits and the settlor’s or beneficiary’s eligibility or qualification for those public benefits is dependent on the nature and scope of his or her rights, powers, and interests in the first trust, then a trustee may decant only to the extent that the decanting would not jeopardize the settlor’s or beneficiary’s eligibility or qualification for those public benefits.
(j) A trustee may not decant to the extent that, under the terms of the second trust:
(1) one or more beneficiaries can remove the trustee;
(2) those beneficiaries can appoint a successor trustee who, with respect to any of them, is a related or subordinate party within the meaning of section 672(c) of the Internal Revenue Code;
(3) the trustee may distribute trust property to any one or more of those beneficiaries; and
(4) the trustee’s discretion to make those distributions is not limited by an ascertainable standard.
(k) A trustee who is a beneficiary of the first trust does not have the power to decant to the extent that, under the terms of the first trust:
(1) the trustee does not have the discretion to make or participate in making distributions to himself or herself unless the terms of the second trust impose the same limitation on that trustee’s discretion;
(2) the trustee’s discretion to make or participate in making distributions to himself or herself is limited by an ascertainable standard unless the terms of the second trust impose the same limitation on that trustee’s discretion;
(3) the trustee’s discretion to make or participate in making distributions to himself or herself is exercisable only with the consent of a cotrustee or a person holding an adverse interest, unless the terms of the second trust impose the same limitation on that trustee’s discretion; or
(4) the trustee does not have the discretion to make or participate in making distributions in a manner that will discharge his or her legal support obligations, unless the terms of second trust impose the same limitation on that trustee’s discretion.
(l) A trustee is not prohibited from decanting solely because:
(1) the first trust is irrevocable;
(2) the terms of the first trust provide that the trust may not be amended or modified;
(3) the first trust contains a spendthrift provision;
(4) under the terms of the first trust, the trustee does not have any discretion in making distributions of income or principal; or
(5) except as provided in subsection (d), the terms of the first trust impose a standard on the trustee’s discretion to distribute income or principal.
(m) A trustee of a charitable trust or a trust in which a charitable organization has a vested interest shall notify the director of charitable trusts of a proposed decanting, and the trustee shall provide that notice in writing at least 30 days before the effective date of the decanting. A trustee of a noncharitable trust may notify a beneficiary of a proposed decanting, but does not have any duty to do so. The right of any beneficiary to object to a proposed decanting terminates if the beneficiary does not notify the trustee of an objection within 60 days after the proposal was sent to the beneficiary but only if the proposal informed the beneficiary of the right to object and the time allowed for objection.
(n) A trustee’s power to decant may be expanded, restricted, eliminated, or otherwise altered by the terms of the trust. A nonjudicial settlement agreement made in accordance with N.H. Rev. Stat. § 564-B:1-111, however, may only restrict or eliminate a trustee’s power to decant. Except as otherwise provided under the terms of the trust, a trustee’s power to decant is in addition to any other powers conferred by the terms of the trust, this chapter, or the laws of this state. This section does not expand, restrict, eliminate, or otherwise alter any power that, with respect to a trust, a person holds in a nonfiduciary capacity.
(o) A trustee does not have a duty to decant or an ongoing duty to consider whether to decant. In exercising the power to decant, a trustee has a duty to exercise the power in a manner that is consistent with the settlor’s intent as expressed in the terms of the trust, and the trustee shall act in accordance with the trustee’s duties under this chapter and the terms of the first trust.
(p) A trustee may exercise the power to decant, without court approval, the consent of the settlor, or the consent of any of the beneficiaries of the first trust. A trustee or any other interested person may ask a court to approve a trustee’s exercise of the power to decant.
(q) Upon a decanting in which all of the first trust’s property is appointed to the second trust, the following shall apply:
(1) The first trust shall terminate;
(2) The terms of the second trust shall govern the second trust and its property, including any property acquired from the first trust;
(3) All title to real property and other property owned by the first trust and all contractual rights possessed by the first trust are vested in the second trust without reversion or impairment, subject to the provisions of paragraph (b); and
(4) All liabilities of the first trust are vested in the second trust.
(r) After a decanting in which all of the first trust’s property is appointed to the second trust, the name of the trustee of the second trust may be substituted in any pending proceeding for the name of the trustee of the first trust.