Trust Decanting Requirements in Montana

At a glance

Requirements one by one

Montana uses a comprehensive distribute-or-modify statute

Montana Code Annotated § 72-39-102(3) defines the authorized fiduciary, while the same section defines the decanting power as authority to distribute first-trust property to one or more second trusts or modify the first trust. A modified first trust itself counts as a second trust. Montana Code Annotated § 72-39-201(1)-(2) keeps the exercise inside the fiduciary's duties and the first trust's purposes, but creates no duty to decant or continually advise beneficiaries about the statute.

The Act reaches older trusts but requires a Montana connection

Under § 72-39-103 and § 72-39-104, the first trust must be an express trust that is irrevocable or revocable only with the trustee's or an adverse-interest holder's consent. The Act applies to trusts created before, on, or after October 1, 2021 when Montana is the principal place of administration or the instrument selects Montana law for the trust or the specified administration, construction, or meaning-and-effect purpose. A trust held solely for charitable purposes is excluded, although a noncharitable trust with a charitable interest can qualify.

Montana Code Annotated § 72-39-211 honors an express decanting prohibition or restriction and requires it to appear in the second-trust instrument. A generic irrevocability, no-amendment, spendthrift, or transfer-restraint clause does not by itself bar decanting.

The fiduciary and the distribution power select the branch

Montana Code Annotated § 72-39-102(3) excludes a settlor and ordinarily requires a trustee or other fiduciary with discretion over principal for one or more current beneficiaries. A court-appointed special fiduciary under § 72-39-205(1)-(2) also qualifies. The special-needs definition in § 72-39-209(1)-(3) reaches a nonsettlor fiduciary with principal discretion, then income discretion if nobody has principal discretion, and finally required income or principal authority if neither discretionary route exists.

Expanded, limited, and special-needs powers have different ceilings

Under § 72-39-207(1)-(6), discretion not limited by an ascertainable or reasonably definite standard is expanded. That branch can decant the principal subject to the beneficiary-tier and vested-interest limits. Montana Code Annotated § 72-39-208 treats a health, education, support, maintenance, or other legally accountable standard as limited discretion; all second trusts together must give each first-trust beneficiary substantially similar beneficial interests.

Montana Code Annotated § 72-39-209(1)-(3) supplies the separate disability route. If the fiduciary reasonably believes the beneficiary may qualify for disability-based government benefits and the statutory findings are made, the fiduciary may use the expanded-discretion route for a qualifying special-needs trust, including the specified pooled-trust or Medicaid-payback terms. Montana Code Annotated § 72-39-217 separately confirms that a present need or ability to compel a principal distribution is not required.

Expanded discretion is broad, not unlimited

Montana Code Annotated § 72-39-207(1)-(6) bars a new person from entering the corresponding current, presumptive-remainder, or successor-beneficiary tier and protects defined vested interests. The second trust may retain or omit an appointment power other than a presently exercisable general power and may create or modify powers for the specified current or later beneficiary. The permissible-appointee class may be broader than the first trust's beneficiaries. The special-needs exception can change the disabled beneficiary's protected interest while requiring substantially similar interests for the other beneficiaries.

Second trusts may cross borders and change duration

Sections 72-39-207 and 72-39-208 permit a second trust created or administered under another jurisdiction's law and permit decanting only the principal over which the fiduciary holds the relevant discretion. Under § 72-39-216, the second trust's duration may be the same or different, but attributable property remains subject to the first trust's maximum-perpetuity, accumulation, and alienation-suspension rules.

The guardrails address more than tax status

Montana Code Annotated § 72-39-215(2) protects the listed marital and charitable deductions, gift-tax exclusions, S-corporation shareholder status, generation-skipping ratio, retirement minimum-distribution treatment, foreign-settlor grantor status, and clearly intended tax benefits. It permits some grantor/nongrantor changes but gives a settlor a signed-record objection in the specified grantor- trust cases.

For charitable interests, § 72-39-210(2)-(5) bars diminishment and changes to stated purposes or restrictions and gives the Attorney General qualified-beneficiary rights for a determinable charitable interest. Montana Code Annotated § 72-39-212, § 72-39-213, and § 72-39-214 separately restrict compensation increases, aggregate liability reduction, and changes to another person's removal or replacement power.

Notice is mandatory, but consent usually is not

Section 72-39-203 requires a record notice at least 60 days before exercise to each living or existing settlor, each qualified beneficiary, each current appointment-power holder and removal-right holder, every first- and second-trust fiduciary, and the Attorney General when the charitable rule applies. The notice states the manner and proposed effective date and includes the first instrument and every second-trust instrument. All recipients may waive the period in signed records; unknown or reasonably unlocatable recipients are excused.

Montana Code Annotated § 72-39-204(1)-(4) makes authorized representation effective for notice, consent, waiver, and an application, but a settlor may not represent a beneficiary. The ordinary exercise needs neither anyone's consent nor court approval.

A signed record exercises the power; court review remains available

Under § 72-39-206, the authorized fiduciary signs a record identifying the first and second trusts and allocating property to each second trust and, if applicable, the property left behind. The statute states no acknowledgment, notarization, sworn declaration, or public filing requirement.

Montana Code Annotated § 72-39-205(1)-(2) lets the court give instructions, appoint a special fiduciary, approve the exercise, declare it ineffective after applying the saving rule, address abuse or breach, and grant other relief. Under § 72-39-203, reasonable care to notify prevents an omitted recipient alone from making the exercise ineffective. Montana Code Annotated § 72-39-218 voids an impermissible second-trust term or deems a required term included to the extent necessary, and § 72-39-202 protects a person who reasonably relies on a distribution or modification's validity.

What trips people up

• A 60-day notice is not a request for beneficiary consent. Notice, waiver, and expiration also do not cut off a later statutory court application.
• The limited-discretion branch does not require identical words in the second trust; it requires substantially similar beneficial interests across all second trusts in the aggregate.
• An express restriction carries into the second trust. A generic spendthrift or irrevocability clause is not the same thing as an express decanting limit.

Common questions

Must the trustee presently need to make a principal distribution?

No. Montana Code Annotated § 72-39-217 allows exercise whether or not the fiduciary would have made—or could have been compelled to make—a principal distribution at that time. The fiduciary still must have the statutory kind of authority or qualify for the special-needs route.

What happens to property discovered later?

Section 72-39-222 follows the exercise's intended scope. Later property goes to the second-trust estate after an intended complete decanting and ordinarily remains in the first trust after an intended partial decanting, unless the exercise or second-trust terms provide otherwise.

Does decanting erase a debt attached to first-trust property?

No. Montana Code Annotated § 72-39-223 makes an enforceable debt, liability, or other obligation enforceable to the same extent against that property in the second trust.

Statutes and sources

• Mont. Code Ann. §§ 72-39-102 to -104 — definitions, scope, Montana connection, retroactivity, and exclusions. Montana Legislature (accessed 2026-09-19).
• Mont. Code Ann. §§ 72-39-201 to -218 — duties, notice, representation, courts, formalities, power tiers, beneficiary limits, and guardrails. Montana Legislature (accessed 2026-09-19).
• Mont. Code Ann. §§ 72-39-222 to -223 — later property and obligations. Montana Legislature (accessed 2026-09-19).