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Georgia’s New Trust Law

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By Hoffman & Associates

Irrevocable trusts just got a lot more flexible in the State of Georgia. On May 3, 2018, Governor Nathan Deal signed Georgia House Bill 121, which amends Georgia’s Trust Code in a number of ways which will be beneficial to numerous Hoffman & Associates clients as well as anyone else with an irrevocable trust in the state of Georgia. The updates to the Trust Code went into effect on July 1, 2018.

First, the legislature extended the rule against perpetuities safe harbor from 90 years to 360 years by amending O.C.G.A. Sec. 44-6-201. This essentially means that new Georgia Trusts will be able to last for up to 360 years, a provision that many other states have enacted. This change is an invaluable update for dynasty trusts like the ones we often use for clients of Hoffman & Associates; it will allow assets to stay protected in trust (and out of the hands of the IRS) for many generations.

The second set of major updates to the Trust Code will provide much-needed flexibility for Grantors and Trustees to modify existing irrevocable trusts. As trust and tax law has evolved over time, it has become imperative to be able to change administrative provisions of trusts to keep up with the ever changing law.

The new statute provides for methods of modifying existing trust agreements as well as modifying a trust agreement by what we call “decanting”, which is transferring the assets of one trust into another trust. Georgia’s Trust Code did not provide for a decanting statute until HB 121 passed. In order to decant a trust using this statute, O.C.G.A. 53-12-62, the rule against perpetuities cannot be extended, and the beneficiaries must be the same.

While O.C.G.A. 53-12-62 governs decanting, there is a separate code section for modifying trusts without decanting, O.C.G.A. 53-12-61. If the trust can be modified pursuant to its terms, no court approval will be required pursuant to Sec. 53-12-61(a).

However, the other modification/termination provisions of Sec. 53-12-61 require court approval or permission, so it may be easier to simply decant an old trust into a new one without having to go to court.

While the Grantor of a Trust is alive, if the trust does not provide for modification, the trustee and all beneficiaries have to petition the court for the modification, but the court must approve of the modification (O.C.G.A. 53-12-61(b)).

After the Grantor’s death, the court must approve a petition to modify the trust if all beneficiaries consent, the trustee has received notice, and the court concludes that the modification is consistent with the material purposes of the trust. In order to terminate the trust, the court must conclude that continuance of the trust is not necessary for any material purpose of the trust (O.C.G.A. 53-12-61(c)).

While the court must approve both of those petitions to modify or terminate, O.C.G.A. 53-12-61(d) gives the court discretion to approve or deny modification or termination in the following circumstances:

  1. To further the trust’s purposes in light of circumstances not anticipated by the grantor.
  2. To modify the administrative provisions of a trust if continuation of the trust under its existing terms would impair such trust’s administration.
  3. To modify the trust by appointing an additional trustee or special fiduciary if necessary or helpful to the administration of the trust.
  4. To modify the trust to achieve the grantor’s tax objectives, with such modification to have either prospective or retroactive effect.
  5. To divide a single trust into two or more trusts or consolidate two or more trusts into a single trust if doing so would be helpful to the administration of the trust(s). Trusts can be consolidated even if they were created by different documents and/or by different grantors.
  6. To terminate a trust if (a) the costs of administration would defeat or substantially impair the purposes of the trust, (b) the trust’s purposes have been fulfilled or become illegal or impossible to fulfill, or (c) continuation of the trust would impair the accomplishment of the purposes of the trust.

Finally, other minor changes to the Trust Code include raising the maximum for a trust to be terminated (based on it being too small) from $50,000 to $100,000 and allowing assets to be titled in the name of the trust and not just the trustee.

For questions regarding this new trust code or any other estate or tax matter, please contact us at 404-255-7400 or email us at info@hoffmanestatelaw.com.