Trust Decanting Requirements in Kentucky

At a glance

Requirements one by one

Covered trusts and Kentucky connection

Section 140 of 2026 Kentucky Acts chapter 134 names Sections 87 through 114 the Uniform Trust Decanting Act. Those sections are codified in Subchapter 13. KRS § 386B.13-020 covers an express trust that is irrevocable or revocable by the settlor only with a trustee's or adverse-interest holder's consent. It excludes a trust held solely for charitable purposes and lets the instrument restrict or prohibit decanting. Under § 386B.13-040, the Act applies to trusts created before, on, or after July 15, 2026 when the principal place of administration is Kentucky or the instrument selects Kentucky law for the specified administration, construction, meaning, or effect question. KRS § 386B.13-140 supplies the detailed rule for express instrument prohibitions and restrictions and requires such a provision to be included in the second-trust instrument.

Authorized fiduciary and three power tracks

KRS § 386B.13-010(3) defines the ordinary authorized fiduciary as a trustee or other fiduciary—never the settlor—with discretion to distribute or direct a distribution of principal to one or more current beneficiaries. A special fiduciary appointed under § 386B.13-080 and a special-needs fiduciary under § 386B.13-120 also qualify.

Expanded discretion under § 386B.13-100(2)-(6) is discretion not limited by an ascertainable or reasonably definite standard. It permits decanting the part of principal subject to that authority. Limited discretion under § 386B.13-110 is bounded by one of those standards; the second trusts together must give each first-trust beneficiary substantially similar beneficial interests. The disability branch in § 386B.13-120(1)-(3) can step down from discretionary principal to discretionary income and then to mandatory income or principal authority, but requires a special-needs trust that benefits the disabled beneficiary and a finding that the exercise furthers the first trust's purposes.

Beneficiary and second-trust limits

On the expanded route, § 386B.13-100 ordinarily bars new current beneficiaries and new presumptive-remainder or successor beneficiaries and forbids reducing or eliminating a vested interest. It separately permits specified powers of appointment to be retained, omitted, created, or modified; the permissible appointee class may be broader than or different from the first trust's beneficiaries. On the limited route, the substantially-similar-interests rule controls. Section 386B.13-190 allows a different duration, but any applicable maximum perpetuity, accumulation, or alienation-suspension rule follows the attributable property.

Notice and exercise record

KRS § 386B.13-060 sets a 60-day period and ordinarily permits exercise without any person's consent or court approval. Notice in a record goes to each living or existing settlor, each first-trust qualified beneficiary, each holder of a presently exercisable appointment power, each current remover or replacer, the other first-trust fiduciaries, the second-trust fiduciaries, and the Attorney General when the charitable-interest rule applies. It states the intended manner and effective date and includes a copy of the first-trust instrument “or” all second-trust instruments. Everyone entitled to notice may waive the period in signed records, and representation under § 386B.13-070 can bind another person, but a settlor cannot represent a beneficiary.

The exercise itself is separate. KRS § 386B.13-090 requires a record signed by the authorized fiduciary that identifies the first and second trusts and states the property going to each second trust and any property remaining in the first.

Guardrails, court review, and saving

The Act preserves charitable interests under § 386B.13-130 and the marital, charitable, S-corporation, qualified-benefits, and settlor-objection limits in § 386B.13-180(2)(a), (b), (d), (f), and (j). KRS § 386B.13-150 limits compensation increases; KRS § 386B.13-160 bars reducing fiduciary liability in the aggregate; and KRS § 386B.13-170 restricts changes to another person's removal or replacement power. Those protections are not replaced by the ordinary no-consent rule.

KRS § 386B.13-080 lets specified persons ask a court for instructions, approval, a special fiduciary, an ineffectiveness ruling, or other relief; ordinary court approval is not a prerequisite. Under § 386B.13-210, an otherwise-effective exercise with a noncompliant second-trust term remains effective: an impermissible term is void to the extent needed, and a required term is deemed included.

What trips people up

The current compiled definition in § 386B.13-010(10) describes distribution to second trusts or modification of the first trust, but its internal cross- reference literally reads “KRS 386B.12-010 to 386B.12-170.” The scope and operative provisions repeatedly use §§ 386B.13-010 through 386B.13-280. The literal mismatch should not be silently rewritten when reading or quoting the new statute.

The notice attachments are also easy to overstate. Section 386B.13-060(5)(c) uses “or” between a copy of the first-trust instrument and all second-trust instruments; it does not say that both sets must accompany every notice.

Common questions

Must the fiduciary be ready to distribute principal on the exercise date?

No. KRS § 386B.13-200 says the fiduciary may exercise even if the first trust's standard would not then have produced, or compelled, a discretionary principal distribution.

Where does property discovered after the exercise go?

KRS § 386B.13-250 defaults later-discovered or later-acquired property to the second trusts after an intended full-principal exercise and to the first trust after an intended partial exercise. The exercise or second-trust terms may provide another disposition.

Does moving property erase an obligation enforceable against it?

No. KRS § 386B.13-260 keeps the obligation enforceable to the same extent after the property is held by the second trust.

Statutes and sources

• 2026 Ky. Acts ch. 134, sec. 140 — official short title for the new Act. Official session law (accessed September 12, 2026).
• KRS § 386B.13-010(3), (10)-(11) — authorized fiduciary, decanting power, expanded discretion, and the literal Subchapter 12 cross-reference. Official text (accessed September 12, 2026).
• KRS §§ 386B.13-020 and 386B.13-040 — covered trusts, exclusions, instrument control, retroactivity, and Kentucky connection. Official scope text and official governing-law text (accessed September 12, 2026).
• KRS §§ 386B.13-050 through 386B.13-090 — reliance, 60-day notice, representation, optional court involvement, and signed exercise record. Official notice text and official exercise-record text (accessed September 12, 2026).
• KRS §§ 386B.13-100 through 386B.13-120 — expanded, limited, and disability routes with beneficiary and appointment-power rules. Official expanded-route text, limited-route text, and disability-route text (accessed September 12, 2026).
• KRS §§ 386B.13-130 through 386B.13-180 — charitable, instrument, compensation, liability, remover, and tax guardrails. Official charitable text, instrument-limit text, and tax-limit text (accessed September 12, 2026).
• KRS §§ 386B.13-190 through 386B.13-210 — duration, present-distribution timing, and saving. Official duration text, distribution-timing text, and saving-rule text (accessed September 12, 2026).
• KRS §§ 386B.13-250 through 386B.13-260 — later-discovered property and continuing obligations. Official later-property text and official obligations text (accessed September 12, 2026).