Combining or Dividing Trusts

When Consolidating Trusts Makes Sense

Families often end up with multiple trusts over time. A married couple might each have a separate trust. A parent might create new trusts for different purposes.

When those trusts serve similar goals or hold similar assets, managing them separately can lead to duplicated fees. It can also create redundant tax filings and added complexity.

In blended families, the situation can be even more complex. A surviving spouse may need to manage trusts from different family situations. Each trust may have its own rules and beneficiaries. Combining those trusts can reduce costs and simplify management.

This statute gives the trustee flexibility to consolidate or restructure without going to court. The trustee must notify the qualified beneficiaries first. The combination or division cannot impair anyone's rights or undermine the trust's purposes.

Dividing a Trust for Better Management

Splitting a trust can be equally practical. A trust with multiple beneficiaries who have different needs may work better as separate trusts.

Division can also serve tax planning purposes. For example, each resulting trust can take advantage of different exemptions or rates.

The key safeguard works in both directions: no beneficiary can be worse off after the change. If a combination would dilute one beneficiary's interest, the trustee cannot proceed. The same applies if a division would shift costs unfairly.

Practical Impact for Family Members

For beneficiaries, this statute means less paperwork, lower fees, and clearer reporting. A trustee can also separate interests when family situations call for it.

This means beneficiaries at different life stages or with different financial needs can each have a trust that fits. Before combining or dividing trusts, consult a professional. A trustee who acts without fully understanding the results could create problems that are hard to undo.