Trust Decanting in Florida: Protecting Assets for Disabled and Elderly Beneficiaries

When a loved one passes away and leaves behind an irrevocable trust, families sometimes face an unexpected challenge: the trust that was meant to provide for their beneficiaries might actually prevent them from accessing vital government benefits. If you're dealing with this situation in Florida, trust decanting might offer the solution you need.

What Is Trust Decanting?

Think of trust decanting like pouring wine from one bottle into another—you're transferring assets from one trust into a different trust with better terms. This process allows trustees to move assets from an existing irrevocable trust into a newly created trust that better serves the beneficiary's current needs.

This becomes particularly valuable when circumstances have changed since the original trust was created. Perhaps a beneficiary has become disabled, or maybe an elderly family member now needs help paying for long-term care through Medicaid.

When Does Trust Decanting Become Necessary?

Here's a common scenario: A parent or grandparent creates a revocable living trust during their lifetime. After they pass away, that trust becomes irrevocable and distributes assets to multiple beneficiaries. Everything seems fine until one beneficiary needs government assistance—maybe they've become disabled, or they're elderly and require help covering the costs of home care, assisted living, or nursing home expenses.

The problem? Many trusts weren't written with disability or long-term care needs in mind. If the original trust gives the trustee broad discretion to spend money on the beneficiary's "health, maintenance, and welfare," Medicaid will count those trust assets against the beneficiary. This can disqualify them from receiving the benefits they desperately need.

How Florida Law Makes Decanting Possible

Florida statutes provide a clear path forward for families facing this dilemma. According to Florida law, when a beneficiary is disabled and the trustee has broad or absolute discretion to use funds for that person's benefit, the trustee has the legal authority to decant those assets.

This means the trustee can take assets out of the problematic trust and pour them into an irrevocable special needs trust—also called a third-party special needs trust. This type of trust is specifically designed to hold assets for a disabled beneficiary without interfering with their eligibility for needs-based government programs like Medicaid waiver services or Medicaid Institutional Care Program (ICP).

The Advantages of Trust Decanting for Florida Families

The beauty of trust decanting lies in its efficiency and effectiveness:

No Court Involvement Required: Unlike some other trust modification methods, decanting doesn't require judicial approval. The trustee can act based on the authority granted by Florida statutes.

Preserves Asset Protection: Once assets are moved into a properly structured special needs trust, they won't count against the beneficiary when determining Medicaid eligibility. This means your loved one can receive the care they need without depleting the inheritance left to them.

No Medicaid Payback Requirement: Because the trust originates from a parent or grandparent (rather than the beneficiary themselves), the new trust doesn't need to include a Medicaid estate recovery provision. When the beneficiary eventually passes away, any remaining trust assets can go to other family members rather than being paid back to the state.

Protects Substantial Assets: Whether the trust contains $50,000 or $500,000, decanting allows families to shield significant resources while still ensuring their loved one receives quality care at home or in a facility.

The Decanting Process in Florida

While trust decanting is straightforward compared to other trust modification methods, it does require careful execution:

1. Trustee Authority: The trustee must have the legal authority to decant under Florida statutes. This typically means they must have broad or absolute discretion over distributions to the disabled beneficiary.
   
   
2. Notification Requirements: The trustee must provide 60-day advance notice to all "qualified beneficiaries." This includes more than just the people named in the trust—it can also include contingent beneficiaries and others who might have an interest in the trust assets.
   
   
3. Proper Trust Drafting: The new special needs trust must be carefully written to comply with both federal Medicaid rules and Florida law. This ensures the assets will truly be protected and the beneficiary will maintain their eligibility for benefits.
   
   
4. Documentation: The entire process must be properly documented to show that the decanting was done correctly and legally.
   
   

Who Benefits from Trust Decanting?

Trust decanting can be a powerful tool for:

• Disabled beneficiaries who need to qualify for Medicaid waiver programs that help pay for services and supports in the community
• Elderly beneficiaries who need long-term care but can't afford the $8,000-$15,000 monthly cost of nursing homes or assisted living facilities in Florida
• Families who want to preserve an inheritance while ensuring their loved one receives proper care
• Trustees who want to fulfill their duty to act in the beneficiary's best interest when circumstances have changed since the trust was created

When Should You Consider Trust Decanting?

If any of these situations apply to you, it's worth discussing whether trust decanting might help:

• You're the trustee of an irrevocable trust and one of the beneficiaries has become disabled or elderly and needs government benefits
• A loved one has been told they have "too many assets" to qualify for Medicaid
• You're concerned that a trust you inherited might prevent you from getting the care you need
• You want to ensure a family member with special needs can receive their inheritance without losing vital benefits

The Importance of Working with a Florida Attorney

Trust decanting involves both trust law and Medicaid planning—two highly technical areas that vary significantly from state to state. Florida's statutes provide favorable opportunities for decanting, but only when the process is handled correctly.

An attorney who focuses on elder needs law and Medicaid planning can:

• Review the original trust to determine if decanting is possible under Florida law
• Draft a new special needs trust that protects the beneficiary's eligibility
• Handle the notification process to all qualified beneficiaries
• Ensure all documentation meets legal requirements
• Coordinate the transfer of assets to the new trust

Additional Resources

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For a more in-depth look at Medicaid planning and how it can help protect your assets while paying for long-term care, check out the book Medicaid: How to Pay for Some of Your Long-Term Care Expenses.

If you're anywhere in Florida and dealing with an irrevocable trust that's causing problems for a disabled or elderly beneficiary, you don't have to let valuable assets go to waste or see your loved one go without needed care. Trust decanting might offer the solution you need to have your cake and eat it too—preserving the inheritance while ensuring access to quality care.

To discuss whether trust decanting could help your family, visit elderneedslaw.com or medicaidplanninglawyer.com to schedule a consultation. With the right legal strategy, you can protect both your loved one's benefits and their inheritance.

This article provides general information about trust decanting in Florida and should not be considered legal advice. Every family's situation is unique, and trust modification involves technical legal requirements that must be tailored to your specific circumstances.

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