Trust Decanting in Florida

Trust decanting is the process by which a trustee distributes assets from an existing irrevocable trust into a new trust with different terms. Florida codified this authority in § 736.04117, allowing trustees to modify trust provisions without court approval. For asset protection purposes, decanting allows a trustee to strengthen creditor protections in an older trust by adding spendthrift provisions, converting mandatory distributions to discretionary ones, changing the trust’s governing jurisdiction, or restructuring distribution standards that leave beneficiary interests exposed.

Statutory Authority Under § 736.04117

Florida’s decanting statute grants the power to decant to an “authorized trustee,” defined as any trustee other than the settlor or a beneficiary who has the power to invade the trust principal. The settlor cannot decant, and a beneficiary serving as sole trustee cannot decant. An independent trustee or a corporate trustee holding distribution authority qualifies as an authorized trustee.

The 2018 amendments expanded the statute significantly. Before 2018, only trustees with absolute power over principal could decant. The amended statute allows trustees with limited power (such as distributions limited to health, education, maintenance, and support) to decant as well, though with more restrictions on what can change. The 2025 legislative session further clarified that an authorized trustee who creates the second trust instrument is not considered the settlor of the second trust, resolving ambiguity that had discouraged some practitioners from exercising decanting authority.

Two Tiers of Decanting Power

The scope of permissible changes depends on whether the trustee holds absolute power or limited power over principal distributions.

Absolute power means the trustee’s authority to distribute principal is not limited to specific or ascertainable purposes. A trust granting the trustee discretion to distribute principal for the beneficiary’s “best interests,” “welfare,” “comfort,” or “happiness” confers absolute power. Under absolute power, the authorized trustee can decant into a second trust that modifies or eliminates powers of appointment, changes distribution standards, extends the trust’s duration, and omits beneficial interests (provided no vested interest is reduced).

Limited power means the trustee’s authority is confined to ascertainable standards such as health, education, maintenance, and support (HEMS). Under limited power, the authorized trustee can still decant, but the second trust must grant each beneficiary a “substantially similar” beneficial interest to what they held in the first trust. The trustee cannot eliminate beneficiaries, and the distribution standards in the second trust must materially preserve each beneficiary’s position.

The distinction between absolute and limited power determines which asset protection modifications are available through decanting.

Asset Protection Applications

Decanting serves several specific functions for trusts that lack adequate creditor protection.

Converting Distribution Standards

Older irrevocable trusts often include mandatory distribution provisions—for example, requiring the trustee to distribute all income annually or to distribute principal at specified ages. Mandatory distributions create a vested interest that creditors can reach. Once a beneficiary has a right to receive a distribution, a creditor can garnish that distribution or obtain a court order requiring the trustee to pay the creditor directly.

A trustee with absolute power can decant the trust into a second trust that replaces mandatory distributions with wholly discretionary authority. Under § 736.0504(2), a creditor of a beneficiary cannot compel distributions from a trust where the trustee has discretion over whether, when, and how much to distribute. Converting from mandatory to discretionary distribution authority is one of the most significant asset protection upgrades available through decanting.

A trustee with limited (HEMS) power faces constraints. The second trust must provide “substantially similar” interests, which arguably means the trustee cannot eliminate a mandatory income distribution entirely. The trustee may, however, restructure the timing and conditions of distributions to provide more flexibility within the “substantially similar” framework.

Adding or Strengthening Spendthrift Provisions

Many older trusts were drafted without spendthrift provisions, or with provisions that do not meet current statutory requirements. Florida § 736.0502 requires a spendthrift provision to restrain both voluntary and involuntary transfers of the beneficiary’s interest. A provision that restricts only voluntary transfers does not qualify.

A trustee with absolute power can decant into a second trust that includes a fully compliant spendthrift clause. Because adding a spendthrift provision does not reduce a vested interest (it protects the beneficiary’s interest rather than eliminating it), this modification is generally permissible even when the first trust lacked spendthrift protection entirely.

A trustee with limited power can add a spendthrift provision to the second trust as long as the beneficiary’s “substantially similar” interest is preserved. Adding creditor protection to an existing beneficial interest does not change the nature or amount of that interest, so this modification falls within the limited-power trustee’s authority.

Changing Trust Situs and Governing Law

A Florida trust can be decanted into a trust governed by a different state’s law if the destination jurisdiction offers stronger creditor protection. Some states provide broader discretionary distribution protection, longer trust durations, or stronger spendthrift enforcement than Florida.

The authorized trustee decants the assets into a second trust that designates the new jurisdiction as its situs and governing law. The trustee of the second trust is typically a trustee licensed or resident in the destination state. This situs change does not require court approval under the decanting statute, though the trustee must comply with the notice requirements of § 736.04117.

For trusts holding assets that are tied to Florida (such as Florida real estate), a situs change may not fully shift the governing law because Florida courts retain jurisdiction over property located within the state. Decanting the trust’s financial assets to a new jurisdiction while retaining Florida-situs property in the original trust (or in an LLC owned by the new trust) is a common workaround.

Restructuring Beneficiary Interests

A trustee with absolute power can decant to modify the class of beneficiaries, provided no vested interest is reduced. Adding a trust protector to the second trust, eliminating contingent beneficiary interests that create unnecessary complexity, or restructuring the trust to separate beneficiaries into individual trusts are all permissible under the absolute-power tier.

Separating a single trust into multiple trusts through decanting is particularly useful when one beneficiary faces creditor exposure and others do not. The exposed beneficiary’s trust can be structured with maximum discretionary protection, while trusts for other beneficiaries can be designed according to their individual circumstances.

Procedural Requirements

The authorized trustee must provide written notice to all qualified beneficiaries at least 60 days before exercising the decanting power. The notice must describe the manner in which the trustee intends to exercise the power, the reason for the exercise, and the proposed terms of the second trust.

A qualified beneficiary may waive the 60-day waiting period in writing. Alternatively, a qualified beneficiary may object to the proposed decanting during the notice period, in which case the trustee must seek judicial approval before proceeding.

The decanting does not require court approval if no beneficiary objects. The trustee executes the second trust instrument, transfers the assets from the first trust to the second trust, and provides copies of the executed documents to the qualified beneficiaries.

Limitations

The statute imposes several restrictions that limit decanting’s usefulness in certain situations.

A decanting cannot reduce a vested interest. If a beneficiary has a current, unconditional right to receive a distribution, the second trust cannot eliminate or diminish that right. A trust that requires a lump-sum distribution to a beneficiary at age 25 cannot be decanted to eliminate that distribution if the beneficiary has already reached age 25 and the right has vested. If the beneficiary has not yet reached the triggering age, the interest is not yet vested and the modification is permissible under the absolute-power tier.

The authorized trustee cannot increase the trustee’s own compensation beyond what the first trust provides, relieve the trustee of liability for breach of trust, or increase indemnification beyond the original trust’s terms. These restrictions prevent self-dealing by the trustee exercising the decanting power.

A decanting cannot add the settlor as a beneficiary of the second trust. The self-settled trust limitation under § 736.0505 would apply if the settlor were added as a beneficiary, exposing the entire trust to the settlor’s creditors.

Decanting vs. Other Modification Methods

Florida provides several methods for modifying irrevocable trusts, including judicial modification, nonjudicial modification by consent, and reformation. Decanting differs from these alternatives in ways that affect its suitability for asset protection modifications.

Each alternative has its own statutory basis within the Florida Trust Code.

Feature	Decanting	Judicial Modification	Nonjudicial Modification
Court approval required	No (unless beneficiary objects)	Yes	No
Public record	No	Yes (court filings)	No
Settlor consent required	No	Varies	Yes (if settlor alive)
Beneficiary consent required	No (notice only)	Varies	Yes (all beneficiaries)
Scope of changes	Broad (absolute power) or limited (HEMS power)	Broad (court discretion)	Requires unanimous agreement

Judicial modification becomes public record, which undermines the confidentiality that many trust settlors intended. Decanting preserves privacy because the process occurs outside the court system. For asset protection purposes, the absence of a public record means creditors are less likely to discover the modification and challenge its terms.

Nonjudicial modification requires the consent of all beneficiaries, which may be impractical when beneficiaries include minors, incapacitated persons, or individuals whose interests conflict. Decanting requires only trustee action with notice, making it procedurally simpler when beneficiary consent is difficult to obtain.

Tax Considerations

Decanting generally does not trigger income tax consequences if the second trust is treated as a continuation of the first trust for federal tax purposes. The IRS has not issued comprehensive guidance on the tax treatment of trust decanting, but most practitioners treat the transfer as a non-taxable event when the second trust’s beneficiaries and distribution provisions are substantially similar to the first trust’s terms.

Decanting that changes the trust from a grantor trust to a non-grantor trust (or vice versa) may trigger recognition of gain on appreciated assets. Decanting that extends the trust’s duration beyond the original term may implicate generation-skipping transfer tax issues if the original trust was exempt from GST tax. These tax consequences should be evaluated before executing the decanting, particularly for trusts holding highly appreciated assets or trusts that have an allocated GST exemption.