Trust Decanting Requirements in North Dakota

At a glance

Requirements one by one

Chapter 59-16.1 appoints principal to an irrevocable trust

North Dakota Century Code § 59-16.1-02 defines an appointed trust as an irrevocable trust receiving principal from an invaded trust. The trustee may create the appointed trust, and the trustee's signature satisfies a settlor- signature requirement for its creation. Sections 59-16.1-04 and -05 authorize appointment of part or all principal. Sections 59-16.1-06 and -13 characterize the route as a nonexclusive special power of appointment.

The invaded trust is irrevocable, and governing law is a separate question

The invaded trust must be an existing irrevocable inter vivos or testamentary trust. Chapter 59-16.1 states no separate administration, situs, settlor- residence, or property-location condition. The general meaning-and-effect rule in N.D.C.C. § 59-09-07 follows the law designated in the trust terms or, absent a controlling designation, the jurisdiction with the most significant relationship to the issue.

Under § 59-16.1-15, an express prohibition controls, but a generic no-amendment, no-revocation, or spendthrift term does not itself block the statutory power.

The authorized trustee must control principal and cannot be interested

Section 59-16.1-02 requires authority to pay principal to or for at least one current beneficiary. It excludes a settlor-trustee and the described current, future, or discretionary beneficiary-trustees. A beneficiary with discretionary income but no principal eligibility may have that interest continued, but does not create the required principal authority.

Unlimited and lesser discretion use different rules

Under § 59-16.1-04, unlimited discretion permits selection among current beneficiaries and among invaded-trust successor and remainder beneficiaries. Words such as best interests, welfare, comfort, or happiness do not limit the power for this definition. Under § 59-16.1-05, a power short of unlimited must preserve the same current, successor, and remainder beneficiary classes, the same distribution language, and any beneficiary appointment power and its appointee class.

If any trustee has unlimited discretion, § 59-16.1-08 gives that trustee the unlimited branch. Section 59-16.1-09 says a current need to invade principal is unnecessary. The chapter states no route based only on mandatory authority.

Appointment powers can broaden only in the unlimited branch

An unlimited-discretion trustee may exclude current beneficiaries, choose among successor and remainder beneficiaries, and give an outright-eligible current beneficiary an appointment power with a broader or different appointee class. Present and future members of an invaded-trust class may remain included. The lesser-discretion branch instead preserves the same beneficiary tiers, distribution language, and appointment power.

Section 59-16.1-16 separately protects current mandatory distributions, mandatory annuity or unitrust interests, and current percentage or fixed-dollar withdrawal rights.

A longer term is possible, but the original perpetuities ceiling controls

Section 59-16.1-07 allows a longer appointed-trust term, including one measured by a current beneficiary's lifetime. The limited branch may add unlimited discretion only for the extended period after the invaded trust otherwise would have ended. Section 59-16.1-16(5) bars an extension beyond any perpetuities period applicable to the invaded trust and makes an overextension void the entire exercise.

Section 59-16.1-11 sends later-discovered and later-acquired principal to the appointed trust after an intended full appointment, but ordinarily leaves it in the invaded trust after a partial appointment unless the trustee provides otherwise.

The prohibition list protects rights, tax status, and fiduciary terms

Section 59-16.1-16 permits a Chapter 59-08 supplemental-needs trust but protects the mandatory and withdrawal interests described above. It bars reducing or indemnifying away the stated trustee-liability floor, changing another person's removal or replacement right without notice or court approval, conclusively fixing asset value, exceeding the perpetuities ceiling, or jeopardizing the listed annual, marital, charitable, direct-skip, and other specific federal tax benefits. Section 59-16.1-17 preserves the compensation-determination method and bars a commission merely for the appointment.

Notice starts a 60-day clock without requiring consent

Under § 59-16.1-12, the trustee delivers the exercise instrument, invaded trust, and appointed trust to each person holding a trust-conferred removal or replacement right and to all qualified beneficiaries. Delivery follows the general statutory notice rule. The exercise ordinarily becomes effective 60 days after delivery; every notice recipient may agree in writing to an earlier date or waive the objection right in writing. The statute expressly dispenses with settlor and beneficiary consent and ordinary court approval.

Silence is not consent. A recipient may serve a written objection before the effective date, and someone who did not object may still oppose the exercise in the resulting proceeding.

The instrument, records, and objection process are explicit

Section 59-16.1-12 requires the authorized trustee to sign, date, and acknowledge the exercise instrument. It states whether all or only part of principal is appointed and gives the approximate percentage for a partial appointment. Copies of the exercise and both trusts go in both trust records.

Without a timely objection, the trustee receives the section's liability protection as to a properly noticed person in personal, representative, and represented capacities. After an objection, either side may petition for the exercise as proposed, with modifications, or denied; the objector bears the stated burden. If the trustee abandons the proposal, the trustee notifies every recipient and gives the reason. Section 59-16.1-10's best-interests and prudent- person duties still govern.

What trips people up

• Unlimited discretion does not mean unlimited beneficiaries. Direct appointed- trust beneficiaries still come from the invaded trust, although a beneficiary appointment power may reach a broader class.
• A written waiver can shorten the effective-date clock or waive objection, but failure to object is expressly not consent.
• A longer term is allowed only inside the invaded trust's applicable perpetuities ceiling; crossing it voids the entire exercise.

Common questions

Must there be a current reason to invade principal?

No. Section 59-16.1-09 says the authorized trustee may appoint without a current need to invade principal. Fiduciary duties still require best-interest and prudent-person judgment.

What happens to property discovered after the exercise?

Section 59-16.1-11 defaults later property into the appointed trust after a full appointment and leaves it in the invaded trust after a partial appointment, unless the trustee provides otherwise.

Is advance court approval mandatory?

No. Section 59-16.1-12 allows exercise without consent or court approval, while preserving voluntary approval and the specific court process after an objection.

Statutes and sources

• N.D.C.C. § 59-09-07 — governing law for the meaning and effect of trust terms. North Dakota Legislative Council (accessed 2026-09-19).
• N.D.C.C. §§ 59-16.1-02 to -17 — definitions, two discretion tiers, beneficiaries, duration, later property, notice, exercise, objections, prohibitions, tax protection, and compensation. North Dakota Legislative Council (accessed 2026-09-19).