The Do Over Trust: Protecting Your Adult Children from Themselves
Once an irrevocable trust is set up with the best of intentions for your children, it's set in stone, and you're out of luck if circumstances change ... or are you? In some cases, you may be able to undo, or "decant," the trust.


Wealthy parents and grandparents who have dutifully planned ahead for their children’s futures should consider this cautionary tale.
It’s 1998:
You accumulated sizable estate assets and you and your lawyer created an irrevocable dynasty trust for your infant son to protect his legacy and provide him a long-term financial safety net. You were a thoughtful and loving parent.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It’s 2018:
A lot has happened over the past 20 years. The business world has changed and the path to independent adulthood lies obscured in your son’s generation's new definition of success: Do what makes you happy, when it makes you happy. Within this paradigm, your son turned into a somewhat lazy young adult with a recent college degree in the History of the Ottoman Empire. Yes, it's a just BA, and no, there is no Ph.D. in his future. With a résumé full of throwaway summer jobs, your son moved back home with no career prospects.
Then, the icing on the cake: Your estate planning attorney calls to remind you she will be making the first sizable distribution from your son’s trust this month. Hearing you groan, she gently reminds you that he can use the money in any manner he sees fit. You rightfully worry that he will quit looking for a job the minute he gets the money and become a “trust fund baby.”
You ask your estate planner to stop the distribution and beg her to save your son from himself. If he gets this money now, he'll never get a job and move out. Unfortunately, the trust you asked her to prepare is irrevocable and cannot be amended.
You Are Not Alone
Sound familiar? You and thousands of Americans are in the same boat, looking to protect your adult children from themselves.
Thirty years ago, conventional wisdom was to draft irrevocable trusts. Estate planners didn't foresee that changing economic and societal circumstances could backfire on the client. No one did.
Until recently, changing an irrevocable trust was next to impossible in most states. Fortunately, that’s starting to change. At the end of 2018, 25 states have “decanting” statutes allowing a broken trust to be fixed. And on Jan. 1, 2019, California joined the club with legislation that just went into effect allowing you to fix a broken irrevocable trust – at least in part and for very limited situations.
The process known as decanting lets you “pour” the assets out of an old inadequate irrevocable trust into a new irrevocable trust with more suitable administrative and dispositive provisions for the changed circumstances. This “Do-Over Trust” can rectify unwanted provisions of an old trust with new terms in a new trust.
All decanting statutes are not created equal. Many states’ decanting laws, like California’s new statute, are quite restrictive and have onerous notice requirements, frustrating some who wish to change the trust provisions but find the requirements to be impractical. Therefore, if the broken trust contains a “change of situs” provision (as most well-drafted trusts do), consider moving the trust situs to another state, like Nevada, Delaware or South Dakota, which have much more flexibility, and then decant under that state’s laws.
Why You May Want to ‘Decant’ a Trust
Besides the foregoing example, additional reasons to decant a trust include:
- Extending the term of the trust: For extended protection to trust assets, if, for example, the old irrevocable trust was set to end at the death of the creator’s children. Say the trust has significant assets now. The creator may wish to keep the assets in trust for multiple generations – a dynasty trust. Nevada’s trust statute allows a trust to last for 365 years before it must end.
- Changing a support trust to a discretionary trust: Changing distributions from “mandatory” to “discretionary” could protect against pending liabilities, creditor claims, tax liens or marriage dissolutions.
- Correcting a drafting error: Perhaps the trust doesn’t contain Special Needs Provisions for a beneficiary who is disabled. Now, the trust may be changed to include special needs provisions allowing the beneficiaries to receive these important provisions.
- Changing the governing law: For example, to avoid state income tax.
- Combining trusts for greater efficiencies: Trust administration can be costly in payment of trustee fees and tax compliance fees. Combining trust may create more efficiencies in administration.
- Qualifying a trust to hold S Corporation shares: Allowing valuable estate planning and asset protection opportunities.
Decanting is a relatively new concept, and the legal community is just discovering what planning opportunities exist to fix poorly drafted or antiquated irrevocable trusts previously thought to be non-correctable. This is a positive option many are now considering.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.
-
What Wall Street's CEOs Are Saying About Trump's Tariffs
We're in the thick of earnings season and corporate America has plenty to say about the Trump administration's trade policy.
By Karee Venema
-
The Role of the U.S. Dollar in Retirement: Is It Secure?
Protect your retirement from de-dollarization, because “capital always goes where it is treated best."
By Adam Shell
-
To Stay on Track for Retirement, Consider Doing This
Writing down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
By Matt Green, Investment Adviser Representative
-
How to Make Changing Interest Rates Work for Your Retirement
Higher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
By Phil Cooper
-
Within Five Years of Retirement? Five Things to Do Now
If you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
By Evan T. Beach, CFP®, AWMA®
-
The Home Stretch: Seven Essential Steps for Pre-Retirees
The decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
By Mike Dullaghan, AIF®
-
Three Options for Retirees With Concentrated Stock Positions
If a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
By Evan T. Beach, CFP®, AWMA®
-
Four Reasons It May Be Time to Shop for New Insurance
You may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS
-
Before You Invest Like a Politician, Consider This Dilemma
As apps that track congressional stock trading become more popular, investors need to take into consideration some caveats.
By Ryan K. Snover, Investment Adviser Representative
-
How to Put Together Your Personal Net Worth Statement
Now that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
By Denise McClain, JD, CPA