Showing posts with label Missouri. Show all posts
Showing posts with label Missouri. Show all posts

Monday, May 19, 2025

Choosing a Nursing Home or Skilled Nursing Facility: Navigating the Long-Term Care Crisis


Choosing a nursing home or skilled nursing facility (SNF) is a critical decision for seniors and families. A recent report from Nonprofit Quarterly, “The Triple Threat Facing Nursing Homes—And How to Overcome It, explains why many residents view nursing home life as being a "Fate Worse than Death." It highlights a crisis driven by private equity ownership, profit-driven care, and COVID-19’s lasting impact. Understanding these risks is essential to selecting a safe facility or planning to age in place with confidence.

This article will break down what the “triple threat” means for you, explain the risk, i.e., the balance of nonprofit versus for-profit facilities, show you how to choose safer nursing homes and how to identify private equity ownership, and why planning to stay out of an institution is more important than ever.

The Triple Threat: What It Means for You

The Nonprofit Quarterly report identifies three interconnected forces threatening nursing home care quality, which directly impact seniors and families considering institutional care:
  • Commodification of Elder Care (“Gray Gold”): Nursing homes have shifted from care-focused to profit-driven models. The article references Timothy Diamond’s book Making Gray Gold, which describes how elder care became a marketable commodity, prioritizing financial gain over resident well-being. For you, this means some facilities may cut corners on staffing, resident meals, supplies, or services to boost profits, potentially leading to neglect, medication errors, or infections.
  • Private Equity’s Aggressive Expansion: Private equity firms are increasingly acquiring nursing homes, using complex financial strategies like inflated service fees or property leasing to extract wealth. These practices often reduce resources for care, resulting in understaffing and substandard conditions. For seniors, this translates to a higher risk of harm in facilities owned by such firms, as seen in cases like the 2018 bankruptcy of HCR ManorCare, where care quality plummeted under private equity ownership.
  • COVID-19’s Lasting Impact: The pandemic exposed and worsened existing flaws, with over 200,000 nursing home deaths highlighting staffing shortages and infection control failures. For families, this underscores the ongoing risk of infectious outbreaks in facilities with inadequate staff or protocols, making safety a top concern.
  • What This Means for Quality of Care: These threats increase the risk of harm in nursing homes, particularly in for-profit facilities. A 2014 Department of Health and Human Services Office of Inspector General (OIG) report found that 33% of Medicare beneficiaries in SNFs experienced adverse events (e.g., hospital readmissions, permanent harm, or death), with 59% deemed preventable due to substandard care or errors. The triple threat amplifies these risks, making it essential to carefully evaluate facilities and prioritize alternatives like aging in place. There is significant incentive for executives too; in the case of HCR ManorCare, the final bankruptcy approved a payout to the former CEO of $116 million.

Nonprofit vs. For-Profit Nursing Homes: The Ratio and Why It Matters

Nationwide, there are approximately 15,000 nursing homes, serving over 1.3 million residents. The ownership breakdown is:
  • For-Profit: 70-72% (roughly 10,500-10,800 facilities), increasingly dominated by private equity, REITs, and midsize chains.
  • Nonprofit: 24% (about 3,600 facilities), often run by faith-based or community organizations.
  • Government-Owned: 5-6% (750-900 facilities), typically public or VA facilities.
The vast majority of nursing homes are For-Profit; you may have to work to find a non-profit in your area.                                                                                                       
Why Nonprofits Are Safer: Studies consistently show nonprofits provide better care. A 2011 LeadingAge New York study found nonprofits had fewer hospitalizations, lower antipsychotic use, and higher staffing levels. A 2020 meta-analysis estimated that nonprofit facilities have 7,000 fewer pressure sores and provide 500,000 more nursing hours daily nationwide. For-profits, especially private equity-owned, have more deficiencies and lower quality ratings, as seen in the 2018 HCR ManorCare bankruptcy, where violations soared under Carlyle’s ownership.

What This Means for You: Prioritize nonprofit facilities when possible, as they’re less likely to prioritize profits over care. However, nonprofits are harder to find, with their share dropping from 30% in the 1990s to 24% today due to financial pressures and acquisitions. Use Nursing Home Compare to filter for nonprofit status and verify during tours.

Spotting Private Equity Ownership

Private equity-owned nursing homes are riskier due to profit-driven cost-cutting. A 2023 Good Jobs First report noted that midsize private equity chains often have fines averaging over $100,000 per facility for violations. Determining ownership cab seem a daunting task, particularly when ownership is not transparently offered to individuals considering that home. Here’s how to identify such ownership:

Check Ownership Details: Use CMS’s Nursing Home Ownership Data (go to data.cms.gov for other data sets) or state licensing records to find the facility’s parent company. Private equity firms often use complex structures with multiple subsidiaries (e.g., separate entities for operations and real estate). Look for names like Portopiccolo Group or HCP, Inc., (now known as Healthpeak Properties, Inc. after a 2019 rebranding, known for private equity or real estate investment trust (REIT) ties.

Look for Related-Party Transactions: Private equity firms may contract with affiliated companies for services (e.g., therapy, staffing), charging inflated fees that drain resources. Ask the facility for a list of contracted services and their providers. If multiple services come from related entities, it may signal profit extraction.

Research Recent Ownership Changes: Facilities that changed hands between 2016 and 2021 (over 20% of U.S. nursing homes) are more likely to be private equity-owned. Check news reports or Ziegler Investment Banking data for recent acquisitions. A 2024 KFF Health News article noted that 900 nonprofit nursing homes were sold to for-profit operators since 2015, often to private equity or REITs.

Ask Directly: During tours, ask administrators about ownership structure and whether the facility is part of a for-profit chain or investment group. Be wary of vague answers or reluctance to disclose.

Choosing Safer Nursing Homes: Key Steps

If institutional care is necessary, selecting a safer facility is critical. Here’s how to navigate the process:

Evaluate Staffing Levels: Staffing is the strongest predictor of care quality. Check the facility’s nurse-to-resident ratio on Nursing Home Compare. CMS’s 2024 minimum staffing rule requires 3.48 hours of direct care per resident day (including RNs and aides). Avoid facilities with frequent staff shortages, as these are linked to higher rates of infections and falls. Ask about staff turnover rates during tours—lower turnover suggests better working conditions and care consistency. Check to make sure that there is at least one RN on staff 24 hours each day.

Investigate Infection Control: Post-COVID, infection prevention is crucial. Ask about the facility’s infection control protocols, vaccination rates, and history of outbreaks. A 2024 OIG report found that 24% of for-profit SNFs failed to meet infection preventionist staffing requirements, increasing risks.

Tour and Observe: Visit potential facilities repeatedly, unannounced, if possible, at different times to observe cleanliness, staff responsiveness, and resident well-being. Red flags include unanswered call bells, unclean rooms, or residents appearing neglected (e.g., unassisted with meals or hygiene). Observe whether staff members know the names of residents and each other. Speak with residents and families about their experiences.

Assess Meal Quality: Nutrition is vital for your loved one’s health and well-being in a nursing home, yet some facilities, may cut costs by offering bland, repetitive meals. When evaluating a facility, visit during mealtime, spend time in the dining room, and request to sample a meal. Inquire about options for dietary needs, such as vegetarian, kosher, heart-healthy, or diabetic diets, and ask residents if they enjoy the food. A high-quality nursing home will confidently demonstrate its dining experience, prioritizing flavorful, nutritious meals tailored to residents’ needs. Poor-quality, unappealing food lacking variety can lead to malnutrition, mental decline, and serious health issues, diminishing your loved one’s quality of life. Choose a facility that invests in its dining program to ensure both health and happiness.
Review Inspection Reports: State inspection reports, available via Nursing Home Compare or state health departments, detail violations. Avoid facilities with repeated or severe deficiencies, such as failure to prevent pressure ulcers or medication errors.

Consider and Compare Costs, Expenses, and Fees: When considering a nursing home, meet with the admissions office to thoroughly review costs, fees, and expenses; lack of transparency can lead to unexpected financial burdens. Candor and transparency might reveal the home as less concerned with "getting a contract and starting billing" and more concerned with a transparent, cooperative, mutually rewarding relationship. Request a detailed, written breakdown of costs before deciding, clarifying what’s included in the base price and which services (e.g., therapy, specialized care) incur extra fees. Discuss Medicaid coverage with the facility’s social worker, even if it’s not immediately needed; some facilities guide families through the application process, potentially saving thousands in legal fees, while others offer little or no support. Inquire about policies for scenarios like hospitalization or hospice care, as these can trigger additional costs. 

Many families are unprepared for the complexity of long-term care financing, and facilities may not fully disclose fees upfront. Medicare and Medicaid often don’t cover all services, and some facilities may not accept both programs, leaving families to face out-of-pocket expenses, disputes, or even discharge. Proactive planning, including exploring Medicaid asset protection with an elder law attorney, can safeguard your finances and ensure your loved one’s care.

Use Multiple Rating Tools: Start with Medicare’s Nursing Home Compare to review a facility’s star rating (1-5 stars) based on health inspections, staffing, and quality measures, but recognize its limitations; you can read multiple articles about the these limitations and weaknesses by selecting the label "Nursing Home Compare" at the lower right of this page (or simply click on the link to perform the search). Complement it with: 

  • U.S.N&W.R.:  U.S. News & World Report’s Nursing Home Ratings evaluates nearly 15,000 nursing homes annually, rating them for short-term rehabilitation and long-term care based on CMS data but with a proprietary methodology that emphasizes outcomes like rehospitalization rates (ideally below 20%) and resident satisfaction.
  • NusingHome411: NursingHome411’s Problem Facilities Dataset, sponsored by the Long Term Care Community Coalition, this rating service and dataset flags Special Focus Facilities and one-star homes, often for-profits. Use this tool to avoid low performers.
  • State-Specific Tools: Many states host their own alternatives to the federal CareCompare, some simply reporting CareCompare information, but many providing more granular data for specific homes in that state.  State-specific tools like Minnesota’s Nursing Home Report Card or Massachusetts’ Survey Performance Tool offer local insights. These alternatives provide a fuller picture of care quality, and align with the need to prioritize nonprofits, offering potentially better outcomes.
    • Ohio Long-Term Care Consumer Guide: Offers inspection summaries, satisfaction surveys, and costs, ideal for nonprofit comparisons (24% of facilities, 7,000 fewer pressure sores).
These tools help prioritize nonprofits and high-quality homes.

Leverage User Reviews: Check the name of a home or institution against the Blog for the National Association to Stop Guardianship Abuse.  The Blog has a convenient search tool, and is one of the most comprehensive sources for news about nursing home cases of abuse and neglect.  Check Yelp, Facebook, or similar platforms for resident and family feedback or stories on staff responsiveness and care quality, but cross-reference with data-driven tools due to potential bias.

Monitor Consumer Feedback and News: Check X for resident/family posts using hashtags like #NursingHomeAbuse or #ElderCare. In Ohio, I was able to identify posts describing lawsuits against Majestic Care of Fairfield (March 2025) regarding alleged staffing-related deaths, and a Warrensville Heights death (January 2025), exposing monitoring failures. In Missouri, one-star Kansas City homes (March 2025) face abuse citations, and a 2024 report noted unnecessary confinement of mentally disabled residents. On the other hand, nonprofits like Friends Care Community, Ohio, earn praise on X for resident satisfaction. These are, of course anecdotal, and like all social media subject to bias, misinformation, misunderstanding, and misattribution. In some cases, though, you may find information critical to your decision.

Beware of Guardianship Abuse: Even if unnecessary you should ask the nursing homes how it handles guardians and conservators, and whether it has an affiliated entity that can serve as a guardian or conservator if needed.  You should ask what percentage of its residents have court appointed guardians/conservators.  Some nursing homes have made guardianship a separate business. For-profit nursing homes may exploit guardianship petitions to collect debts or secure Medicaid payments, overriding valid Powers of Attorney (POAs) or family wishes. A 2024 report noted New York facilities coercing payment through guardianship, costing families up to $10,000 in legal fees.  Facilities may refer petitions to attorneys or nonprofit “guardianship mills,” not formal subsidiaries, to manage finances, but this practice—seen in 12% of Manhattan cases (2002-2012)—is profit-driven, and not resident-focused.  Be wary if the institution has a close relationship with a guardianship business or non-profit, particularly if it is directly affiliated with the nursing home.  A nursing home that prefers working with court-appointed guardians and conservators is possibly a threat to your independence and decision-making, and a possible threat to family directed care and financial management.

   
Choosing Safer Nursing Homes: What to Avoid

Don't Overestimate the Value of Proximity- While proximity is often a top priority for seniors and families selecting a nursing home—wanting a facility close to the senior’s home or a family member’s residence—it shouldn’t overshadow care quality. Being nearby makes it easier to visit and monitor your loved one’s treatment, but a closer facility with frequent lapses in care, such as injuries, staff conflicts, or resident disputes, can lead to more unexpected trips and stress, reducing meaningful time with your loved one. A higher-quality nursing home, even if farther away, may require a longer drive but offer better care, fewer emergencies, and more rewarding visits. Balance proximity with quality to ensure your loved one’s safety and well-being.

Avoid Crisis Decision-making: When a parent or loved one’s Medicare hospital benefit nears its end, families often face intense pressure to find a nursing home quickly, tempting them to settle for the first available bed. This crisis-driven approach can lead to choosing a facility with substandard care, especially in for-profit homes influenced by private equity or REITs where quality may suffer. Instead, plan ahead while your loved one is healthy, researching and shortlisting high-quality, preferably nonprofit facilities. Alternatively, explore options at the onset of a hospitalization or a chronic condition diagnosis. By proactively evaluating choices, you can avoid risky “last resort” facilities and ensure safer, more compassionate care.

Look Beyond the Surface- Don't Be Fooled By Appearance: When selecting a nursing home, don’t be swayed by appearances alone. A sparkling new facility with elegant decor and cutting-edge technology may catch your eye, but true quality lies in the care provided. Older, less glamorous nursing homes with low patient-to-staff ratios, dedicated staff, and a genuine commitment to residents often offer safer, more compassionate care than luxurious but poorly managed homes. Fancy furnishings and white linen tablecloths mean little if a facility is overcrowded or understaffed. While modern infrastructure is a one-time investment (plus ongoing maintenance), quality staff, effective management, and continuous training are daily expenses that profit-driven facilities might skimp on. Focus on the bigger picture—prioritize the care your loved one will receive over superficial charm.

Why Plan to Age in Place

The triple threat underscores why avoiding institutional care through aging in place is a smarter strategy. Here’s why and how to plan:

Lower Risk of Harm: Nursing homes carry inherent risks, with 20-23.5% of Medicare patients rehospitalized within 30 days, often due to preventable issues like infections or medication errors. Home-based care reduces exposure to institutional risks, as shown by Medicare’s Independence at Home program, which cut hospitalizations and saved $2,700 per beneficiary annually.

Better Quality of Life: Aging in place allows seniors to stay in familiar surroundings, maintaining independence and emotional well-being. The Nonprofit Quarterly article emphasizes amplifying resident voices, which is easier at home with family or caregiver support.

Cost Savings: Nursing home care is expensive, averaging $8,700/month for a semi-private room (2024 NPR report). Medicaid covers costs for eligible seniors but requires depleting assets, threatening family legacies like farms or homes. Home care, while not cheap, can be more affordable with Medicare home health benefits or long-term care insurance.

How to Plan To Age in Place

Legal Planning: Work with an elder law attorney to create an Aging in Place Planning Trust and/or Medicaid Asset Protection Trust or update your estate plan from a simple will or simple probate avoidance revocable trust to state your wishes, and protect your assets and decision-making. Powers of attorney and advance directives for health and dementia help ensure your care preferences are honored.

Home Modifications: Install grab bars, ramps, or stairlifts to make your home safer. A certified aging-in-place specialist can assess needs.

Care Coordination: Explore home health aides or telehealth services (e.g., virtual care hubs like Good Samaritan’s 2022 initiative) to manage medical needs. Medicare covers skilled home health for qualifying conditions.

Financial Planning: Purchase long-term care insurance early (ideally in your 50s-60s) to cover home care costs. Budget for private-pay caregivers if needed.
Community Support: Engage family, friends, or local senior services (e.g., Area Agencies on Aging) to build a support network, reducing reliance on institutional care.

Additional Considerations

Advocacy and Oversight: The Nonprofit Quarterly article suggests advocating for stronger regulations and ombudsman programs. Families should connect with Long-Term Care Ombudsmen (available in every state) to report concerns or monitor facility quality. Joining resident or family councils empowers you to demand better care.

Medicaid Funding Gaps: Low Medicaid reimbursement rates strain facilities, especially for-profits, leading to closures or quality cuts. Support policies increasing Medicaid funding to improve care options.

For-Profit Risks: Beyond private equity, for-profit chains like Skyline Healthcare (bankrupt in 2018) have left residents stranded. A 2024 CBS News investigation found neglect patterns in for-profit facilities, with cases like a 92-year-old left alone and injured. Scrutinize for-profit facilities, especially midsize chains with opaque ownership.

Conclusion: Plan Smart, Stay Safe

The triple threat—commodification, private equity, and COVID-19’s fallout—has made nursing homes riskier, particularly for-profit facilities, which dominate 70-72% of the market. For seniors and families, this means, in the worst case, prioritizing nonprofit facilities, thoroughly vetting ownership, and checking staffing and quality metrics before choosing a nursing home. The safest and most fulfilling option is to plan for aging in place, leveraging legal, financial, and home modifications to stay independent. By working with elder law professionals and exploring home-based care, you can avoid the risks of institutional care and protect your health, assets, and legacy.

For personalized guidance, contact our office to discuss aging in place planning, Medicaid planning, long-term care options, or home safety assessments. Visit Medicare.gov for facility comparisons, and reach out to your state’s Long-Term Care Ombudsman for support. Your future deserves careful planning—start today.

Friday, April 25, 2025

Trust Decanting


Trust decanting is a legal process that allows a trustee to transfer assets from one, usually, irrevocable trust (the original trust) into a new trust with updated or more favorable terms, without requiring court approval or the consent of the beneficiaries. Essentially, it "pours" the assets from the old trust into a new one, much like decanting spirits from one container to another. This tool is often used in estate planning to adapt to changing circumstances, laws, or family needs while preserving the trust's original intent and purpose.


An example of a case where decanting might have been used if permitted by state law is found in my recent article, Irrevocable Medicaid Planning Trust Risks: State Refuses to Permit Trust Termination. In that case a Pennsylvania couple created an irrevocable trust for the primary purpose of protecting assets from nursing home spend down, but the circumstances changed: the trust was no longer effective and the selected trustee was no longer trusted. Pennsylvania doe not have a decanting statute, and the trust probably did not permit trust decanting (or if it did, the appointed trustee would not exercise the authority). The couple, therefore, was forced to ask a court to rescue their plan by terminating it. The courts in that case declined, leaving the irrevocable as written- vulnerable to nursing home spend down and an untrusted trustee.

When Trust Decanting Can Be Used
Trust decanting is typically available when:
  • State Law Allows It: Decanting is governed by state-specific statutes, with over 30 U.S. states (as of 2025) having enacted decanting laws (e.g., Delaware, Nevada, New York, Ohio and Missouri). The trustee must have authority under the trust document or state law to distribute principal or income, which serves as the basis for decanting.  Decanting may still be permitted In states without statutes, under common law, as seen in Massachusetts, Morse v. Kraft466 Mass. 92 (2013) or the foundational case from Florida, Phipps v. Palm Beach Trust Co.196 So. 299, 142 Fla. 782 (1940). However, relying on common law is less predictable and often not advisable when compared to statutory authority.  
  • Trustee Has Power/Discretion: The original trust must grant the trustee sufficient discretionary power over distributions (e.g., the ability to distribute assets "for the benefit of" beneficiaries). The extent of this discretion often determines how much flexibility the trustee has in crafting the new trust.
  • Need for Change: Common triggers include updating outdated trust terms, changing beneficiaries (e.g., removing a problematic one), adjusting tax strategies, relocating the trust to a more favorable jurisdiction, or fixing drafting errors.
When Trust Decanting Can’t Be Used
Decanting is not an option in the following cases:
  • No State Law Support: If the trust is governed by a state without a decanting statute or common law permitting decanting and/or the trust document doesn’t explicitly allow it, decanting may not be permitted or advisable.
  • Limited Trustee Authority: If the trust restricts the trustee’s discretion (e.g., mandatory distributions only), decanting may not be feasible.
  • Beneficiary Rights Violated: Decanting cannot materially harm the vested rights of beneficiaries unless state law or the trust permits it. For example, eliminating a beneficiary’s fixed income stream might be prohibited.
  • Court Oversight Required: Some trusts or jurisdictions may require judicial approval, negating the streamlined nature of decanting.
Costs
  • Legal and Administrative Fees: Drafting a new trust and executing the decanting process typically involves attorneys and possibly accountants, costing anywhere from a few thousand to tens of thousands of dollars, depending on complexity.
  • Tax Filings: Transferring assets might require updated tax filings or valuations, adding to the expense.
  • Time: While faster than court modifications, decanting still requires planning and documentation, which can take weeks or months.
Benefits
  • Flexibility: Decanting allows trusts to adapt to new tax laws, family dynamics, or financial goals without starting from scratch.
  • Avoiding Court: It bypasses the costly and public process of judicial trust modification.
  • Tax Optimization: Trustees can move assets to trusts in states with no income tax or adjust terms to minimize estate or generation-skipping transfer taxes.
  • Privacy: Unlike court proceedings, decanting is a private process handled by the trustee and advisors.
  • Fixing Errors: It can correct ambiguities or outdated provisions in the original trust.
Decanting Risks
The narrative around trust decanting often emphasizes its utility in modernizing, updating, or otherwise "fixing" irrevocable trusts, but there are gaps in the establishment view, and risks often downplayed or undisclosed.
  • Legal Uncertainty: The Uniform Trust Decanting Act (UTDA), drafted in 2015, provides a model for states to adopt decanting laws with tax safeguards and trustee protections. States like Alabama, California, Colorado, and New Mexico have adopted versions of the UTDA, though some, like Florida, have statutes inspired by the UTDA but not officially recognized as such by the Uniform Law Commission. As a result, decanting statutes vary widely. For example, South Dakota and Nevada are considered top destinations due to their flexibility, such as allowing decanting without mandatory beneficiary notice. In contrast, states like California have stricter notice requirements, mandating 60 days’ notice to beneficiaries and other interested parties. The variety oof approaches leads to uncertainty as courts deal with a wide array of statutes and laws governing decanting.
  • Tax Consequences: Improper decanting could trigger unintended gift, estate, or income tax liabilities if not carefully structured (e.g., shifting assets might be seen as a taxable event).  The IRS has not issued definitive guidance on the tax consequences of decanting, leaving practitioners to rely on private letter rulings and general trust law principles]. This uncertainty could lead to unintended tax consequences, such as estate tax inclusion under IRC §2036 or §2038 if the trustmaker is deemed to have control.
  • Beneficiary Disputes: Even if legally permissible, beneficiaries might challenge the decanting in court if they feel cheated (e.g., reduced benefits), leading to litigation costs. Legal uncertainty weighs heavily in such cases.  For example, some states, like New Hampshire, "allow" decanting without beneficiary notice, raising ethical questions about transparency and fiduciary duty. Critics might argue this prioritizes trustee flexibility over beneficiary protections, and courts may establish equitable or legal remedies or boundaries , especially in extreme cases. 
  • Loss of Intent: Overzealous changes might stray too far from the grantor’s original purpose, risking legal pushback or ethical concerns.
  • Jurisdictional Limits: If the new trust’s terms or location exceed what state law allows, the decanting could be invalidated.
  • Complexity: Mistakes in execution (e.g., failing to notify beneficiaries where required) could unravel the process.

Comparison and Contrast- Ohio, Missouri, New York, Delaware, and Nevada

To provide more explicit appreciation of the complexities of what may seem like a simple procedure, I will compare and contrast the trust decanting statutes in Ohio, Missouri, New York, Delaware, and Nevada, focusing on key aspects such as statutory authority, trustee authority, beneficiary notice requirements, tax implications, and unique features or challenges of the law. What follows is for illustrative purposes, and should not be seen as legal advice, or preference of one state over the other.  I selected Ohio and Missouri because I regular practice in these states.  I selected New York, Delaware, and Nevada, because these states are most commonly discussed as exemplars of consumer oriented trust decanting statutes.  I have not considered a state without statutory authority, i.e., operating under the common law.
1. Overview of Decanting Statutes
  1. New York:
    • Statutory Authority: New York was the first state to enact a decanting statute in 1992 under §10-6.6 of the New York Estates, Powers and Trusts Law (EPTL). The statute has been amended multiple times, with significant updates in 2011 and 2019 to expand trustee powers and address tax concerns.
    • Purpose: The statute allows trustees to modify trusts by distributing assets to a new trust with different terms, often to update provisions or change beneficiaries.
  2. Delaware:
    • Statutory Authority: Delaware’s decanting statute is found at 12 Del. C. § 3528, enacted in 2003 and updated over the years to enhance flexibility.
    • Purpose: Known for its trust-friendly environment, Delaware’s statute allows broad trustee discretion to decant, aligning with the state’s goal of attracting trust business.
  3. Nevada:
    • Statutory Authority: Nevada’s decanting statute is codified at NRS § 163.556, enacted in 2011 and recognized as one of the most flexible in the U.S.
    • Purpose: Designed to maximize trustee flexibility with minimal procedural hurdles, the statute makes Nevada a top destination for trust administration.
  4. Ohio:
    • Statutory Authority: Ohio’s decanting statute is part of the Ohio Trust Code (ORC § 5808.18), enacted in 2007 and amended to align with modern trust practices.
    • Purpose: The statute provides a mechanism for trustees to modify trusts while balancing flexibility with fiduciary duties.
  5. Missouri:
    • Statutory Authority: Missouri’s decanting statute is found at Mo. Rev. Stat. § 456.4-419, enacted in 2011 as part of updates to the Missouri Uniform Trust Code.
    • Purpose: Missouri allows trustees to decant to improve trust administration, with specific procedural requirements to protect beneficiaries.
2. Trustee Authority to Decant

  • New York:
    • Trustees must have "absolute discretion" to distribute principal to decant under EPTL § 10-6.6(b)(1). If the trustee has limited discretion (e.g., an ascertainable standard like health, education, maintenance, and support—HEMS), decanting is more restricted, and the new trust must retain the same standard.
    • The 2019 amendments expanded the statute to allow decanting even for trusts with limited discretion, but the new trust must preserve the original standard unless all beneficiaries consent .
  • Delaware:
    • Delaware allows decanting if the trustee has the authority to distribute principal, regardless of whether the discretion is absolute or limited (e.g., HEMS). The statute is notably flexible, permitting the trustee to decant into a trust with different terms, even if the original trust has an ascertainable standard.
    • The new trust can have different beneficiaries, but the trustee must act in good faith and in accordance with fiduciary duties.
  • Nevada:
    • Nevada’s statute is one of the most permissive, allowing trustees to decant if they have the authority to distribute principal, whether absolute or limited (e.g., HEMS). The trustee can decant into a trust with discretionary distributions, even if the original trust had an ascertainable standard, without needing beneficiary consent.
    • The statute explicitly allows the new trust to have different terms, including changing beneficiaries, making it highly flexible, but less reliable to a specific outcome.
  • Ohio:
    • Ohio requires the trustee to have the authority to distribute principal, but the statute distinguishes between absolute discretion and limited discretion. If the trustee has absolute discretion, they can decant into a trust with different terms. If discretion is limited (e.g., HEMS), the new trust must retain the same standard unless modified with beneficiary consent or court approval.
    • The trustee must act in the best interests of the beneficiaries and in accordance with the original trust’s purpose.
  • Missouri:
    • Missouri allows decanting if the trustee has the authority to distribute principal, but the statute is more restrictive than Nevada or Delaware. If the trustee’s discretion is limited (e.g., HEMS), the new trust must retain the same standard, similar to New York and Ohio.
    • The trustee must act in good faith, and the new trust must be for the benefit of the same beneficiaries unless otherwise permitted by the statute.
  • Comparison:
    • Nevada and Delaware offer the most flexibility, allowing trustees to decant even with limited discretion and to significantly alter trust terms, including beneficiary provisions.
    • New York, Ohio, and Missouri are more cautious, requiring the new trust to retain the original standard (e.g., HEMS) if the trustee’s discretion is limited, unless beneficiaries consent or a court approves.
  • Contrast:
    • Nevada stands out for allowing the most drastic changes to trust terms without mandatory beneficiary involvement, while New York and Missouri impose stricter limits to protect the original trust’s intent.
    • Delaware balances flexibility with fiduciary oversight, allowing changes to beneficiaries but requiring the trustee to act in good faith, while Ohio requires the
      trustee to act in the best interests of the beneficiaries and in accordance with the original trust’s purpose.
3. Beneficiary Notice and Consent Requirements

  • New York:
    • Prior to the 2019 amendments, New York required notice to beneficiaries with a vested interest, but the updated statute allows decanting without notice in some cases, particularly if the trustee has absolute discretion.
    • If the trustee’s discretion is limited, notice to beneficiaries may still be required, and their consent might be needed to change certain terms (e.g., removing a mandatory income interest).
  • Delaware:
    • Delaware does not require notice to beneficiaries for decanting, giving trustees significant autonomy.
    • However, the trustee must act in good faith, and beneficiaries can challenge the decanting if it violates fiduciary duties.
  • Nevada:
    • Nevada also does not require notice to beneficiaries, making it one of the most trustee-friendly states for decanting.
    • The lack of notice requirements enhances privacy and flexibility but may raise concerns about beneficiary protections.
  • Ohio:
    • Ohio requires the trustee to provide notice to certain beneficiaries (e.g., current beneficiaries and those who would receive notice under the Ohio Trust Code) at least 60 days before decanting, unless waived by the beneficiaries.
    • The notice requirement ensures transparency but can delay the process and potentially lead to objections.
  • Missouri:
    • Missouri requires 60 days’ notice to all qualified beneficiaries before decanting, similar to Ohio.
    • The notice must include a copy of the new trust instrument, ensuring beneficiaries are informed of the changes, though their consent is not required unless the decanting alters a mandatory distribution.
  • Comparison:
    • Ohio and Missouri both mandate 60-day notice to beneficiaries, emphasizing transparency and beneficiary protection.
    • Delaware and Nevada have no notice requirement, prioritizing trustee flexibility and privacy.
  • Contrast:
    • New York’s notice requirements depend on the trustee’s discretion level and the specific decanting action, making it more situational than the consistent notice mandates in Ohio and Missouri or the complete lack thereof in Delaware and Nevada.
    • The absence of notice in Delaware and Nevada could lead to beneficiary disputes if they feel their interests are harmed, whereas Ohio and Missouri’s notice requirements provide a safeguard against such issues.
4. Tax Implications and Protections

  • New York:
    • New York’s statute includes tax safeguards, such as ensuring that decanting does not trigger estate tax inclusion under IRC §2036 or §2038 by avoiding the trustmaker’s control over the new trust.
    • The 2019 amendments clarified that decanting can be used to preserve tax benefits, such as generation-skipping transfer (GST) tax exemptions, by ensuring the new trust retains the same tax status as the old trust.
  • Delaware:
    • Delaware’s statute is designed to minimize tax risks, allowing decanting to preserve GST tax exemptions and avoid estate tax inclusion, provided the trustee follows fiduciary duties.
    • The flexibility to change beneficiaries can raise tax concerns, but Delaware’s statute generally supports tax-neutral decanting if structured properly.
  • Nevada:
    • Nevada’s statute is highly tax-friendly, with provisions to ensure decanting does not jeopardize GST tax exemptions or trigger income tax consequences.
    • The lack of notice requirements and broad trustee discretion make it easier to structure tax-advantaged decanting, though careful planning is still required to avoid IRS scrutiny.
  • Ohio:
    • Ohio’s statute includes provisions to protect tax benefits, such as ensuring the new trust retains the same GST tax status as the old trust.
    • However, the notice requirement can complicate tax planning if beneficiaries object and trigger a taxable event (e.g., by challenging the decanting as a distribution).
  • Missouri:
    • Missouri’s statute also aims to preserve tax benefits, ensuring decanting does not trigger estate or GST tax consequences if the new trust aligns with the old trust’s tax status.
    • Like Ohio, the notice requirement can introduce tax risks if beneficiaries contest the decanting, potentially leading to IRS scrutiny.
  • Comparison:
    • All five states include tax safeguards to preserve GST tax exemptions and avoid estate tax inclusion, reflecting a common goal of ensuring decanting is tax-neutral.
    • Nevada and Delaware’s flexibility makes tax planning easier, as trustees can make significant changes without mandatory beneficiary involvement.
  • Contrast:
    • Ohio and Missouri’s notice requirements introduce a potential tax risk if beneficiaries object, whereas New York, Delaware, and Nevada offer more streamlined processes with less risk of beneficiary interference.
    • New York’s 2019 amendments provide explicit tax protections, making it a leader in addressing IRS concerns compared to the more general provisions in Ohio and Missouri.
5. Unique Features and Restrictions

  • New York:
    • Unique Feature: As the first state to enact a decanting statute, New York set a precedent for others. The 2019 amendments expanded the ability to decant trusts with limited discretion, a significant evolution.
    • Restriction: A trustee cannot accelerate remainder interests (e.g., distributing assets to remainder beneficiaries early), which limits flexibility in some scenarios.
  • Delaware:
    • Unique Feature: Delaware allows decanting to change beneficiaries, a rare provision that enhances flexibility, especially for trusts with outdated beneficiary provisions.
    • Restriction: The trustee must act in good faith, and decanting cannot violate the material purpose of the original trust.
  • Nevada:
    • Unique Feature: Nevada is ranked as one of the best states for decanting due to its lack of notice requirements and ability to convert ascertainable standard trusts into discretionary trusts without beneficiary consent.
    • Restriction: While highly flexible, the trustee must still comply with fiduciary duties, and decanting cannot violate Nevada’s public policy.
  • Ohio:
    • Unique Feature: Ohio’s statute integrates with the Ohio Trust Code, providing a cohesive framework for trust administration, including decanting.
    • Restriction: The 60-day notice requirement can delay decanting, and the trustee cannot decant to remove mandatory income interests without beneficiary consent or court approval.
  • Missouri:
    • Unique Feature: Missouri’s statute requires the new trust to be for the benefit of the same beneficiaries, ensuring continuity of purpose.
    • Restriction: Like Ohio, the 60-day notice requirement applies, and the trustee cannot decant to eliminate mandatory distributions without consent or court approval.
  • Comparison:
    • Nevada and Delaware stand out for their flexibility, allowing significant changes to trust terms, including beneficiaries (Delaware) and distribution standards (Nevada).
    • New York, Ohio, and Missouri are more protective of the original trust’s intent, with restrictions on altering mandatory distributions or accelerating remainder interests.
Contrast:

    • New York’s historical precedence and recent amendments make it a leader in balancing flexibility with tax protections, while Nevada and Delaware prioritize trustee autonomy.
    • Ohio and Missouri’s notice requirements and restrictions on mandatory distributions reflect a more conservative approach, prioritizing beneficiary protections over trustee flexibility.
Conclusion

In practice, trust decanting is a powerful tool for modernizing irrevocable trusts, but it requires careful navigation of legal, tax, and family considerations. Trustees should consult estate planning attorneys to ensure compliance and maximize benefits while minimizing risks.





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