Decanting and Trust Modifications
- These clients had several older trusts that they wanted to modify given changes in family dynamics and tax laws.
- Colony Trust Company served as trustee and decanted several old trusts into new trusts for the same beneficiaries with different terms that addressed issues with respect to unmotivated beneficiaries.
- The new trusts were drafted in a way that allowed a family member to serve alongside Colony Trust Company as a Co-Trustee.
- Through a series of discovery meetings, Colony Trust Company undertook the following steps to meet family objectives:
- Modified or decanted trusts without court approval to add charities as permissible trust beneficiaries
- Navigated opportunities to extend the rule against perpetuities
- Allowed for silent trusts with regards to beneficiary statements and notifications
- Allowed for trust protectors and strengthened substance abuse and drug testing provisions
- Created custom reporting with transparency for ownership of liquid, illiquid, and closely-held interests
Mitigate State Income Taxes and Enhance Asset Protection
- In this case, we helped a client establish a Spousal Lifetime Access Trust and structured the trust to be a non-grantor trust for income tax purposes.
- This trust provided the client with an asset protection vehicle and mitigated state income taxes equal to $2M in connection with the sale of the family-owned business.
Mitigate Income Taxes Upon Intra-Family Trust Transfers
- A client’s family business was owned by several generational trusts.
- Given changes to various “Know Your Client” (KYC) regulations, certain financial institutions were asking the client to disclose information on a primary beneficiary with a police record and substance abuse issues.
- The family was motivated to sell company stock from one generational trust to another to reduce the beneficiary’s ownership to less than 25%.
- Colony Trust Company was able to help the family divide certain non-grantor trusts and convert them into grantor trusts to facilitate a $40M transaction that mitigated $9M of capital gain taxes.
Planning Success by Moving Place of Trust Administration & Governing Law to Tennessee
- Husband created a Spousal Lifetime Access Trust (SLAT) over ten years ago for Wife who became very ill.
- In retrospect, the couple probably transferred too much of their personal wealth into the SLAT, which was prior to Colony’s involvement.
- Unfortunately, the original terms did not grant Wife the ability to appoint the SLAT assets back to Husband if Wife predeceased him. The original terms also included “silent trust” provisions, so none of the children actually knew about the trust.
- Because of mounting medical bills, Husband and Wife desired to decant the SLAT into a new SLAT that gave Wife the ability to redirect the SLAT assets back to Husband if she predeceased him.
- However, they did not want to notify their children of this change because they feared it would cause them to worry more about her health condition.
- Since TN trust law allows trusts to be decanted without providing notice to beneficiaries (unlike NC), Colony Trust Company was able to successfully move the principal place of administration from its NC office to its TN office and also change the governing law from NC to TN to add the desired provisions without notifying the children.