Imagine a trust signed twenty years ago that hands a grandson his inheritance outright at 21, names a bank that no longer exists as backup trustee, and requires filings that made sense under tax rules long since repealed. The person who wrote it has died, you are the successor trustee, and the document is not going to change on its own.
In Nevada, one tool a trustee may have for a problem like this is trust decanting. This post explains what decanting is, what Nevada’s statute allows, where it stops, and how it compares with the other ways to fix a trust after the person who created it has passed away.
What Is Trust Decanting?
The name comes from pouring wine from one bottle into another to leave the sediment behind. In trust law, a trustee “pours” the assets of an existing trust into a new trust with better terms. The beneficiaries stay the same (or become a narrower group), but the rules that govern the trust change.
Nevada’s decanting statute is NRS 163.556. It does not actually use the word “decanting.” What it does is give a trustee who has discretion to distribute income or principal to or for a beneficiary the power to exercise that discretion by appointing the property to a second trust for the benefit of one or more of those beneficiaries, unless the trust says otherwise. The statute covers testamentary trusts and irrevocable trusts, which includes a living trust that became irrevocable when the person who created it died.
Nevada is known as one of the more flexible decanting states. A trustee acting within the statute generally does not need a court order or the formal consent of the beneficiaries. The statute lets the trustee give notice of the proposed action or ask a court to approve it, but it does not require either one.
What Decanting Can Fix
When a trustee has the right kind of discretion, decanting can be used to:
- Add a trust protector or trust advisor, so future problems can be solved without returning to court.
- Turn a mandatory distribution into a discretionary one, which can shield a beneficiary who is going through a divorce, facing creditors, or struggling with addiction.
- Move the trust to Nevada, changing its governing law and place of administration.
- Divide one trust into separate trusts, one for each beneficiary, so a conflict between siblings does not tie up everyone’s share.
- Add administrative powers the old document lacks, such as authority to hold a business interest, manage real estate, or handle digital assets.
- Replace outdated language, such as a corporate trustee that has merged out of existence.
What Decanting Cannot Do
Decanting has real limits, and knowing them keeps a trustee out of trouble.
The trustee must have discretion. If the trust requires the trustee to pay out all income or principal by a fixed rule, there may be no discretion to exercise, and the statute may not apply.
Certain tax benefits are protected. Decanting cannot be used to eliminate an income interest that a trust needs in order to qualify for a marital deduction, a charitable deduction, or a similar tax benefit.
Specific gifts and existing shares are protected. A trustee cannot take away property specifically allocated to a beneficiary without that beneficiary’s consent, and a decanting generally should not leave a beneficiary with less than the original trust gave them.
The clock does not restart. Under the statute, the perpetuities period for the new trust is measured from when the original trust was funded. Decanting cannot create a fresh period.
The trust itself may say no. A trust document can restrict or prohibit decanting, and language about the settlor’s intent can limit what a trustee is allowed to do, so the entire document needs to be read, not just the distribution article.
It is not a repair for a mistake. Decanting works inside the trustee’s existing discretion. If the trust contains a drafting error or does not say what the settlor meant, the fix is usually a nonjudicial settlement agreement or trust reformation, not decanting.
Fiduciary Duties Still Apply
Because Nevada does not require notice, some people assume decanting is a private decision with no accountability. It is not. A trustee who decants still owes duties of loyalty and impartiality to every beneficiary, and a beneficiary who believes they were shortchanged can challenge the decision in court after the fact.
A cautious trustee asks a simple question before signing anything: does this change anyone’s financial position? If the answer is yes, giving notice, or asking the court to approve the decanting, is often cheaper than defending it later. Special care is also needed when a trustee is also a beneficiary, because the statute adds limits and the tax consequences can be significant.
Decanting After a Death
Most of what is written about decanting is aimed at wealth managers with long-term dynasty trusts. The situation we see is different. A parent has died, the living trust has just become irrevocable, and a son or daughter is now the trustee of a document they did not write and cannot amend.
A sensible order of operations looks like this. Read the whole trust and every amendment. Identify precisely what is not working. Confirm the trustee actually holds discretionary distribution authority. Consider the tax consequences. Then choose the tool that fits, which may be decanting or may be something else. Our post on how to fix a bad trust in Nevada compares all three options side by side.
If you are still getting oriented as a new trustee, start with our guides to the documents a successor trustee needs and common successor trustee mistakes.
Frequently Asked Questions About Decanting in Nevada
Do I need court approval to decant a trust in Nevada?
Not under NRS 163.556, though a trustee may choose to petition the court or give notice to protect themselves.
Can a successor trustee decant after the person who made the trust dies?
Often yes, if the trust is now irrevocable and the trustee holds the required discretionary authority. Whether it makes sense depends on the trust’s terms and the tax picture.
Will decanting change who receives the inheritance?
It should not. The new trust must benefit one or more of the original beneficiaries, and the statute protects specific gifts and certain tax-driven interests.
Can a beneficiary object?
Yes. Even without a notice requirement, a beneficiary can raise a claim that the trustee breached their duties.
Talk to a Nevada Trust Attorney Before You Decant
Decanting is a tool that is easy to describe and easy to misuse. At Boyer Law Group, our practice is devoted to the legal work that follows a death, and we help trustees and beneficiaries throughout Las Vegas, Henderson, Reno, and the rest of Nevada figure out whether a trust can be fixed and how. If you are holding a trust that does not work, schedule a free consultation or call (702) 778-4579.
Related reading: For the full picture, see our guide to changing an irrevocable trust in Nevada after the settlor dies. If you want help, here is what to expect when hiring a trust modification attorney in Las Vegas.
This article is general information about Nevada law, not legal advice for your situation.
Written by: Kim Boyer