Maryland’s New Decanting Law – Going Beyond the Vineyard

By: Stephen R. Elville, J.D., LL.M. – Managing Principal and Lead Attorney

Maryland’s new decanting law, effective October 2023, is a huge development.  What am I talking about?  It’s about Maryland finally catching up with many states that have enacted laws allowing for the decanting of trusts – the ability to change a trust from one form to another – into a new trust; or to amend an old trust.  If this strikes you as strange or weird, you are not alone.  But once we take the time to think about it, decanting probably makes sense, especially since Maryland’s decanting law, in my view, is straight down the middle and beneficial in many useful and practical ways.  

Consider how many irrevocable trusts exist throughout the United States.  Thousands?  No.  Tens of thousands?  No.  Hundreds of thousands?  Now we are probably getting close.  Many of these trusts are older, meaning they were established under laws that existed in the past, and they were designed or developed with only the practical techniques that existed at the time.  Very few of these trusts have any form of built-in flexibility – the ability to amend, revise or update the trust over the passage of time, if needed, for the purposes of modifying for changes in circumstances, changes in material purposes, or changes related to health or other circumstances of the trust beneficiaries, or because of on-going changes in the tax laws, and many other potential variables over time.  What was the law to do?  

Well, various forms of approach to this problem developed over the years, such as the recognition by courts of the necessity of reforming trusts by way of judicial modification, common law techniques, non-judicial settlement agreements, to the recognition of special fiduciaries with amendment power such as trust protectors or advisors, and now decanting.  Focusing strictly on decanting, under the new Maryland law, a trustee can now decant certain trusts with or without court approval, subject to a very clear criteria depending on how much discretion is provided in the original trust – this includes the ability to change an original trust to a new trust, or to amend an existing trust in a significant way.  Happily, this means that Marylanders can now avail themselves of the benefits of this fantastic area of the law. But it also means that on a broader scale, Maryland has, by virtue of this law, now become a desirable jurisdiction for out-of-state residents to utilize Maryland law for the decanting of their own trusts. Lastly, and I am happy to report, Maryland’s new decanting law recognizes and emphasizes planning for persons with disabilities, or what is otherwise known as special needs planning.  Parents, grandparents, and others can now have the confidence that when they implement long-term trusts for children, grandchildren, nieces and nephews, or other beneficiaries, that not only is there significant flexibility available in foundational planning to provide for stand-by supplemental needs trust planning for unforeseen circumstances involving disability for beneficiaries, but also long after their passing and long after the irrevocable trusts are in place for further beneficiaries.  Those long-term trusts may now be decanted, subject to their terms and provisions, to provide for the protection of disabled beneficiaries – and those who may become disabled later in life long after an otherwise irrevocable trust is established.  For example, a general needs trust might be decanted into a supplemental needs trust, thereby preserving assets and paving the way for the disabled person to utilize means-tested public benefits that may be available to them.

I strongly recommend that you familiarize yourself with Maryland’s new decanting law.  One easy way to do that is to watch my latest webinar where we break down the elements of Maryland’s decanting law and gain an understanding of what clients generally need to know about decanting.  Finally, I know that many of you are wine lovers and understand the concept of decanting in the context of wine and winemaking.  To all readers, including the wine connoisseurs among you, I say, “Cheers!”

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