A Brief Overview of
North Dakota’s New
Trust Decanting Statute
By Thaddeus E. Swanson
On March 21, 2017, the North Dakota
Legislative Assembly enacted N.D.C.C.
Ch. 59-16.1, which allows a trustee to
decant a North Dakota-created trust.1
North Dakota now joins 25 other states
that have enacted this procedure.2
“Decanting” is traditionally defined as
“[t]o pour (a liquid) from one receptacle
into another.”3 Similarly, trust decanting
involves “the distribution of trust
property to another trust pursuant to the
trustee’s discretionary authority to make
distributions to, or for the benefit of, one
or more beneficiaries.”4 Trust decanting
may be accomplished by operation of
common law,5 express authority in the trust
agreement itself, or by state statute.6
Under Chapter 59-16.1, a North Dakota
trustee, in its discretion, is now permitted
by statute to appoint part or all of the
trust principal of an invaded trust7 to a
second trust, called an “appointed trust,”8
for the benefit of one, all, or less than all
beneficiaries.9 Section 59-16.1-12 sets
forth a procedure for the trustee to execute
this power, as well as a mechanism for a
beneficiary or other interested person to
lodge an objection to the trustee’s exercise
of the power.
North Dakota law provides two sets of
rules for decanting: first, when the trustee
has unlimited discretion, 10 and second,
where the trustee does not have unlimited
discretion. 11 Section 59-16.1-04 grants a
trustee with unlimited discretion authority
to appoint all or part of the trust principal
of an invaded trust to an appointed
trust. 12 The trustee is authorized to
make such appointment for one,
more than one, or all of the current
beneficiaries and exclude one or more
of the same. 13 The trustee is further
authorized to name any or no successor or
remainder beneficiaries of the appointed
trust. 14 The statute does not consider the
words “best interests,” “welfare,” “comfort,” or
“happiness” to be a limitation on the trustee’s
power to distribute principal. 15 In contrast,
a trustee without unlimited discretion may
appoint part or all of a trust’s principal to
the trustee of an appointed trust, so long
as the current and successor or remainder
beneficiaries of both the invaded trust and
the appointed trust are the same. 16
Decanting often stems from a desire to make
changes in an otherwise irrevocable trust. 17
Generally, irrevocable trusts are created
for three primary reasons: to purchase
life insurance, for charitable giving, and
for gifting property to family members. 18
An irrevocable trust, as the name suggests,
is “often viewed as not capable of being
modified or terminated after the grantor’s
death in light of their ‘irrevocability.’” 19 A
common reason for decanting is to modify
the terms of an irrevocable trust due to
changed circumstances. 20 Commentators
have indicated a list of reasons a trustee may
find a need to decant, e.g., correction of a
drafting mistake or combining trusts for
efficient management. 21
A trustee’s discretion, even when broadly
granted by the governing instrument, is
not without limits. North Dakota’s trust
decanting statute places restrictions on a
trustee’s power to decant. 22 There are four
main limitations on the trustee’s power
under Chapter 59-16.1 of which trustees,
practitioners, and advisors may wish to take
note.
First, a trustee may not reduce, limit,
or modify a beneficiary’s present right
to mandatory distributions, mandatory
annuities, or unitrust interest or a current
right to withdraw a percentage of the value
of the trust or a specific dollar amount. 23
Second, a trustee may not decrease its
liability or exonerate itself from liability for
failure to exercise reasonable care, diligence,
and prudence. 24 Third, a trustee may not alter
or eliminate a provision granting another
the right to remove or replace the trustee. 25
Finally, a trustee, for all practical purposes,
may not change provisions regarding
its compensation as trustee or receive
compensation for decanting a trust. 26
Trustees and practitioners should also be
aware the issue of whether the exercise of the
special power of appointment in a decanting
situation is done so in a fiduciary or non-
fiduciary capacity remains unsettled. 27 With
the recent enactment of Ch. 59-16.1, North
Dakota trusts and estates practitioners, as
well as trustees, have at their disposal another
tool to adapt to changing circumstances in
the administration of trusts.
Thaddeus E. Swanson is an associate attorney at the Nilles Law Firm where he practices in the areas of
estate planning, probate, and general business and corporate law. He is a graduate of the University of
North Dakota School of Law and North Dakota State University.
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THE GAVEL