On October 16, Nassau County Surrogate, Hon. Edward W. McCarty, rendered an important decision in Matter of Schreiber, 2012-369907 (Sept. 30). The subject involved “decanting” a trust to a Special Needs Trust.
The term “decanting” is exactly what you would think it means; the trustees of a trust can “pour” the assets to a new trust for the beneficiary (subject to certain restrictions). The new trust can have different terms if the new trust gives the beneficiary the same benefits as contained in the first trust.
Schreiber involved a trust established by parents for the benefit of their special needs son. It was established many years ago before there was any inkling the son would have special needs. The trust provided the son had the right to withdraw the entire trust property when he turned 21 years old. Once he turns 21 years old, the entire trust property is an available resource which would disqualify him from governmental benefits.
Five days before the son’s 21st birthday, the trustees of the trust established a new Special Needs Trust for the son’s benefit and transferred the old trust’s property to the new trust. The trustees complied with New York law in making transfer. A temporary guardian appointed by the Court to represent the son’s interests, approved the transfer. The New York State Attorney General’s office opposed it.
The Court approved the transfer over the Attorney General’s objection. As long as the transfer occurred before the son’s 21st birthday it could be “decanted” into a new trust. The only person allowed to object is the beneficiary.
The importance of the case is to reinforce the “decanting” concept giving the trustees of a trust to correct problems with an existing trust or add provisions which may have not been available when the trust was first signed.