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New Arizona Case Clarifies Trust Decanting

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Trust decanting

Circumstances change. Trusts often are not adaptable to those changes. Sometimes trusts run for many years, or even decades. Increasingly, lawyers and trustees turn to trust decanting as a means of updating older trust language.

What is trust decanting?

Decanting is a relatively recent idea in trust administration. In some circumstances, a trustee may be able to create a new trust for the same beneficiary. The trustee can then transfer assets to the new trust. Problems — often unforeseen when the trust was first established — can magically disappear.

Trust decanting takes its name from the idea of pouring old wine into a new vessel. Just as flaws in the old container may be remedied by decanting, a trust can be updated by the act of decanting.

Arizona, like many states, has adopted a decanting statute. It is quite simple, and gives terrific discretion to the trustee. There are, however, a few limitations on use of the tool.

A recent Arizona Court of Appeals case on the Arizona statute reviewed the law for the first time. The case involved a family dispute that may not have been earth-shattering, but it does give some insight into the limits of trust decanting.

The Sibley trust

In 1986, Yuma residents Phil and Lucille Sibley created a trust to hold all of their property. They named themselves as trustees, and made the trust revocable so long as they were still alive. Phil died in 2004. When Lucille died more than a decade later, her will instructed that the family’s farmland should stay in trust for the couple’s three children.

Lucille’s will ordered the farmland held in the trust until her youngest great-grandchild reached age 21. In the intervening years, all the net income from the farmland was to be distributed to the three children or, on their deaths, to grandchildren. On the youngest great-grandchild’s 21st birthday, the trust would terminate and the farmland would be distributed to the children (or, if any of them had died, to their offspring).

Lucille’s trust named two of her children as co-trustees. Those two children wanted to update the language to a more modern version. The third child disagreed. He wanted to simply divide the farmland up and give a third to each of the siblings.

The trustees filed a petition with the probate court for approval of the proposed trust decanting. The probate judge agreed that it made sense, and entered an order approving the request.

The court of appeals decision

All three children appealed. In an opinion issued last month, the Arizona Court of Appeals reversed the probate court’s decision on trust decanting. The appellate court explained the limitations of the trustee’s power to decant.

Arizona’s statute allows decanting whenever the trust gives the trustee discretion to distribute principal to a beneficiary. The key is that the trustee has to have authority to make a distribution in order to distribute to a new (decanted) trust.

The problem with Ms. Sibley’s trust? The co-trustees had no authority to distribute the farmland itself — they could only distribute the farm’s income. Therefore, they could not update the trust by decanting.

The other issue in Ms. Sibley’s will/trust

The case actually addressed an almost completely unrelated issue, as well. Ms. Sibley’s will, which exercised her power over the trust, had language that could be viewed as ambiguous. The language of her will included the phrase “it is my desire” or “I desire” in two key places:

“It is my desire that the real property (farmland) … be held in further trust,” her will said. Later, she wrote “I desire that the farmland not be sold until my youngest great-grandchild reaches the age of twenty-one.”

Did those “desires” amount to an actual bequest, or were they merely suggestions that she hoped her children would follow? The two co-trustees insisted that they only made sense as direct commands. The third sibling argued that they were free to disregard her “desires.” More to the point, the third child insisted that the will gave him permission to ignore those desires.

The probate court had ruled that the language of the will was actually mandatory. In other words, Ms. Sibley had effectively created a trust.

The appellate court decision agreed with the probate judge on this point. Taking the language of her will as a whole, it was clear to the Court of Appeals that Ms. Sibley intended to put the farmland into the trust. Estate of Sibley, July 26, 2018.

What are the broader messages?

Trust decanting is a powerful and flexible tool. Arizona’s broad decanting statute is not always available, however.

More careful drafting might well have avoided the problems with Ms. Sibley’s trust and will. She could, for example, have specifically included a power to decant to include updated administrative provisions. Rather than expressing her “desires”, the will could have clearly mandated transfer of the farmland into a trust. Either of those improvements could at least have limited the legal costs ultimately incurred in interpreting her documents.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.